Over the next few months, we saw social mobility increase dramatically since Ramadan, and heading toward the year-end, we welcomed the Group of 20 Bali Summit in November and then the revocation of the public activity restrictions (PPKM) on the eve of New Year’s Eve.

Globally, accelerating inflation rates in major countries was another significant event that affected the global economy. In response to high inflation, the monetary authorities in many countries, including Indonesia, raised their policy rates.

Indeed, high inflation became unavoidable as multiple factors interacted: rising energy prices, food supply disruption stemming from the Russia-Ukraine war and seasonal factors, as well as supply chain disruption due to rapid post-pandemic recovery.

What will be the domestic impact of the aforementioned significant events from 2022? In general, Indonesia has benefited from the rising global prices of commodities, such as coal and crude palm oil.

Coal was again used in some European countries as an alternative to gas, the supply of which had been disrupted by the Russia-Ukraine war. This is reflected in Indonesia's trade balance, which has been positive for the past 32 months.

But high commodities prices are like a double-edged sword.

While Indonesia’s exports were boosted, rising oil prices has created fiscal pressure since early 2022, forcing the government to make adjustments to subsidized fuel prices in September.

Regardless of the adjusted fuel prices, domestic inflation had continued to creep up since March, reaching a peak of 5.95 percent in September. Since then, inflation has been trending downward, and now hovers at around 5.28 percent.

How did the above dynamics affect overall household consumption? Using data from the Mandiri Spending Index (MSI), we observed several trends in consumers’ spending habits last year.

First, as prices rise, people become more defensive, which means they become more selective in their spending. Spending on staple goods such as food, groceries, or basic daily needs is prioritized over spending on durable goods, such as household equipment and electronics.

In terms of income group, spending among the middle class has slowed following Ramadan and Idul Fitri in May. Our historical data show that the middle class, generally comprising employees and other formal workers, has been the backbone of consumer spending thus far.

As a result, the slowdown in the group’s spending has resulted in a slowdown in overall spending. Nonetheless, middle class spending has been increasing again since early October.

Meanwhile, we observed another nuance in spending across regions in Indonesia, with much of the spending dynamics reflecting the difference in income sources.

For example, spending in commodities-producing regions like Kalimantan, Sumatra and Sulawesi has been more resilient than in other regions. Spending in Bali and Nusa Tenggara, on the other hand, remains unstable relative to other regions.

Fourth, we saw that, after a long period of stagnation, spending began to rise again as we approached December. Spending increases were evenly distributed across all regions, including Bali and Nusa Tenggara. Spending on travel and tourism, electronics, fashion, restaurants and supermarkets increased significantly.

Another interesting observation was that the spending trend in 2022 resembled the pre-pandemic spending pattern, or spending during normal conditions.

Specifically, seasonal effects prompting a significant rise in spending occurred only during the Ramadan-Idul Fitri and the year-end holiday seasons. Beyond these two periods, spending has been stable, which is the normal pattern for consumer spending.

This is in contrast to the spending pattern in 2020-2021 during the pandemic, when it was marked by sharp corrections, such as at the onset of the pandemic or during the surge in cases caused by the Delta variant. This was then followed by normalization, to the level prior to the correction.

We have now entered the second month of 2023. What was the trend in consumer spending at the beginning of this year? We have noticed several things.

First, as is typical, spending at the start of 2023 normalized after increasing significantly at the end of 2022. The MSI stood at 131.7 in late January, a 13 percent correction from the spending peak in late 2022.

According to previous patterns, the index would have corrected by some 13 percent over four weeks and then stabilized at this level.

The second point is that the slowdown in spending growth since the third quarter of 2022 carried over to early 2023. Inflation is likely to have slowed spending growth.

For context, the January 2022 inflation rate was only 2.18 percent, or less than half of the January 2023 rate of 5.28 percent. Since 2022, the slowdown in spending growth has been primarily seen in household, medical and restaurant.

The slowdown in spending growth in early 2023 is consistent with the data McKinsey presented last week at the Mandiri Investment Forum. The results of McKinsey’s Consumer Pulse Survey in January 2023 show that only 58 percent of Indonesian consumers is optimistic about economic recovery following COVID-19, which is lower than the survey results in March 2022 (68 percent) and August 2022 (80 percent).

Third, normalization occurs primarily in mobility-related sectors, such as travel and hotels.

Nonetheless, airlines and fuel consumption were relatively stable at the beginning of the year. Meanwhile, fashion spending fell sharply as a result of reduced promotions and discounts.

On the other hand, spending on durable goods such as electronics and mobile phones remained relatively stable, though spending in these two sectors had increased significantly by the end of 2022. Despite the inflationary pressures and many uncertainties that could affect consumer spending, the recent stability in durable spending sends a signal of consumer optimism for the future.

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The writer is an analyst at the Mandiri Institute.