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Emergency curbs reverse recovery in consumer confidence, retail sales
Consumer confidence has fallen back into pessimistic territory and retail sales booked an annual contraction after three months of recovery.
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People crowd a shopping center in Jakarta on May 27, 2019 as malls across the city sold various Ramadan-related items and held bazaars offering discounted items. (JP/Dhoni Setiawan)
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three-month recovery in consumer confidence and retail sales came to an abrupt end as shops and offices were closed and travel was severely restricted in an effort to rein in soaring COVID-19 infections and deaths last month.
Bank Indonesia (BI) reported last week that its consumer confidence index dropped to 80.2 in July, well below the threshold of 100 and hence marking a return to pessimistic territory, reversing a recovery in consumer confidence that had begun in April.
Meanwhile, the retail sales index was estimated to have contracted by 6.23 percent in July from a year earlier, BI reported on Tuesday. The contraction occurred across all categories, except vehicle fuels.
The fall in consumer confidence had been expected given the emergency curbs imposed by the government, said Faisal Rachman, an economist at state-owned Bank Mandiri, the country’s largest lender. With more consumers turning pessimistic, household spending and overall economic growth are expected to slow.
“Household spending is still likely to register growth in the third quarter of 2021 on a year-on-year [yoy] basis but be lower than in the second quarter,” Faisal told The Jakarta Post in a phone interview, explaining that this was due to the base effect.
Faisal estimated that household spending would grow 1 percent yoy this quarter and that GDP overall would be up 3.5 percent yoy, supported by government expenditure, investment and net exports.
Indonesia’s GDP grew by 7.07 percent yoy in the April-to-June period, largely thanks to the base effect and seasonal factors, Statistics Indonesia (BPS) reported last week. Inflation remained muted despite the unusually high growth.
