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Retail sales stall in December despite strong consumer confidence
Well-controlled inflation has helped consumers to stay optimistic throughout last year, but growth on retail sales stalled with the public choosing to prioritize spending on basic needs amid uncertainty.
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ooming uncertainty has stalled retail sales, with people showing a tendency to cover their basic needs before other spending despite Indonesian consumers remaining optimistic throughout last year thanks to maintained inflation and improved economic conditions.
Retail sales were projected to grow by only a miniscule amount of 0.04 percent year-on-year (yoy) to 216.4 in December, marking the lowest growth last year after the growth continued to fall since July at 6.2 percent yoy, Bank Indonesia (BI) data show.
On a monthly basis, however, retail sales still increased by 6.3 percent.
“Improvement was mainly seen in clothing and electronics due to high sales of digital TVs, while food and beverages are propped by Christmas, New Year’s Eve and discounts that spur domestic demand,” BI’s spokesperson Erwin Haryono said on Tuesday.
The clothing category booked the highest sale, growing by 10.4 percent yoy, followed by recreational and miscellaneous goods at 4.9 percent yoy and 3.3 percent yoy, respectively.
Foods and beverages, which was supposed to have high demand following eased mobility restriction during Christmas and New Year Eve celebrations, only grew by 1.7 percent yoy.
Meanwhile, electronic sales grew 0.2 percent yoy in December, marking the only growth throughout last year.
Correction in household appliances sales contributed the most to suppressing retail sales growth after being downed by 14.4 percent yoy last year, followed by sales in automotive fuels and motor vehicles, which declined by 10.7 percent yoy and 9.6 percent yoy, respectively.
“Consumers are prioritizing fulfilling their primary needs, compared to secondary and tertiary needs,” Center of Economic and Law Studies (CELIOS) director Bhima Yudhistira told The Jakarta Post on Tuesday.
Read also: Consumer confidence drops, retail sales sluggish ahead of spending season
The miniscule sales growth in December was already dampened by the high-base effect in December 2021, when the government began to ease travel restrictions.
Even though the government implemented a no-restrictions policy in last year’s December festivities, the above-target inflation and interest rates had taken their toll on consumers' purchasing power, which lower the demand for property and durable goods.
Meanwhile, the consumer confidence index (CCI) rose by 0.8 points to 119.9 in December, quickly rebounding after a fall in the preceding month, according to BI data.
The CCI considers public opinion on personal income, employment prospects and the macroeconomic environment as things affecting propensity to spend, which in turn affects the nation's overall consumer expenditure.
“A much-improved consumers’ confidence in December was propped up by the optimism about the current conditions, which shows an uptick in all of its components,” BI’s Erwin said in separate statement.
The current economic conditions subindex rose by 2.1 points to 112.4 from a month before, as consumers felt upbeat about their present income, employment opportunities and ability to purchase durable goods.
However, subindex on future expectations fell by 0.6 points to 127.3, extending the slide since November, as consumers feel less optimistic about the job market and business activities in the next six months.
Read also: Manufacturing closes 2022 on high note, opens 2023 upbeat
Lower-income consumers, those spending below Rp 2 million (US$128.30) a month, had a much better confidence in the economy in December than the preceding month due to an improved job market that saw a shift from pessimistic to optimistic.
The group, however, remained cagey about purchasing durable goods, as their viewpoint continues to linger in the pessimistic arena with 95 points in December despite a 4-point rise from the previous month.
“CCI in 2022 improved much better than in 2021 due to the low-base effect,” Institute for Demographic and Poverty Studies (IDEAS) economist Askar Muhammad told the Post on Tuesday. BI data show that half of 2021 had the CCI in pessimistic territory.
Askar said that the government’s success in controlling inflation within a 5-percent range has contributed positively to consumer optimism in 2022, as inflation was expected to soar following a price hike on subsidized fuel last year.
For this year, he expects consumer confidence to continue improving, with inflation projected to subside despite many who would remain wary of the effect of global recession.
“With a composed consumer confidence, economic growth in 2023 could grow optimally, even in the face of a potentially lower trade balance,” Askar added.
