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Consumer confidence recovery fragile as pandemic’s end uncertain
A survey by Bank Indonesia (BI) shows that the consumer confidence index (IKK) rose to 92 in November, up significantly from 79 in October.
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Shoppers and vendors mill around Tanah Abang Market in Central Jakarta on June 15. (JP/Dhoni Setiawan)
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conomists and businesspeople have warned that the recovery in consumer confidence in November remains fragile – despite hopes of a year-end holiday shopping spree – because of continuing uncertainty about how long the pandemic will last.
Indonesian consumer sentiment improved significantly in November to its highest level since March, when the country recorded its first COVID-19 cases, as economic activity picked up in response to relaxations of movement restrictions, boosting consumer optimism regarding job availability and income growth, despite continuing surges in coronavirus cases.
A survey by Bank Indonesia (BI) released on Tuesday showed that the consumer confidence index (IKK) rose to 92 in November, up significantly from 79 in October. An IKK value above 100 reflects general hopefulness, while a value below 100 signifies pessimism.
“The government’s handling of the pandemic as well as vaccine distribution will determine further improvement in domestic consumption,” Bank Mandiri economist Faisal Rachman told The Jakarta Post on Tuesday. “We may see a further rise in consumption during the year-end holiday, but it will remain limited because of the pandemic.”
The outbreak has paralyzed business activity as consumers have either preferred or have been required to stay at home to avoid exposure to the virus, resulting in layoffs and furloughs that have hit purchasing power. Household consumption, which accounts for more than half of the country’s gross domestic product (GDP), shrank 4.04 percent in the third quarter, deeper than the 3.49 percent overall economic contraction but better than the 5.52 percent contraction in the second quarter.
Core inflation, which excludes volatile food items and goods under government price controls, fell to 1.67 percent year-on-year (yoy) in November from 1.74 percent a month before, signaling weak purchasing power.
“We are seeing a surge in consumption in line with higher mobility and the disbursement of the government’s stimulus,” Faisal said. “Moreover, the development of the coronavirus vaccine and the year-end holiday effect have also provided a boost to people’s confidence.”
