Indonesians' consumer confidence has increased in January 2014 according to the latest survey conducted by Indonesia's central bank (Bank Indonesia). The outcome of the survey indicated a rise of Indonesia's Consumer Confidence Index (CCI) from 116.5 in December 2013 to 116.7 in January 2014¹. This index illustrates consumer perceptions of current economic conditions compared to conditions in the previous six months as well as the expectations of Indonesian consumers for economic conditions in the next six months.
The higher score indicates Indonesia's consumer optimism about near-future economic conditions. Optimism particularly applied to the country's job availability as well as consumers' income. The survey involved 4,600 respondents in 18 major Indonesian cities. The highest increase (17.4 points) was recorded in Palembang (Sumatra), followed by Banten (West Java).
Besides assumed strengthening household consumption, respondents also feel the presence of rising price pressures in the three months ahead, evidenced by a higher Price Expectations Index compared to December 2013. Inflationary pressures are felt because of LPG price increases and Indonesia's legislative election in April 2014. Meanwhile, regarding the next six months, the majority of respondents also expect price increases due to increased demand during the fasting month (Ramadhan) and Idul Fitri celebrations (which always cause a spike in the country's inflation rate), as well as concerns about safety/socio-political conditions after the first round of the presidential election (9 July 2014).
Last week, a report by Nielsen showed that consumer confidence in Southeast Asian countries remained higher than the global average in the fourth quarter of 2013. Indonesia continued to top the index with a score of 124 (its highest level in four years), rising four points from the Q3-2013, followed by the Philippines (114 points) and Thailand (109 points). Main factors that contributed to higher confidence in Indonesia were expectations that the legislative and presidential elections scheduled for April and July 2014 will have minimal disruptive effects on jobs and income. The survey also indicated that essential living expenses, traveling, technology and clothing will be the top targets of consumer purchases in 2014.
Consumer confidence is an important indicator, especially in Indonesia where domestic consumption (mainly household consumption) accounts for about 55 percent of total economic expansion.
¹A reading above 100 indicates optimism, while a reading below 100 indicates pessimism