According to the latest survey of Indonesia's central bank (Bank Indonesia), consumer confidence in Southeast Asia's largest economy fell 3.3 points to 110 in September 2016 (a reading above 100.0 indicates optimism). Consumer confidence somewhat weakened as the Indonesian people expect upward price pressures at the year-end, specifically rising prices of processed food, beverages, cigarettes, tobacco and groceries. Meanwhile, respondents also expect to put less money in savings in the next six months.
In December and January Indonesia traditionally experiences a peak in inflation as consumer demand rises amid Christmas and New Year celebrations. In September 2016 Indonesia's consumer price index (CPI) expanded 3.07 percent year-on-year (y/y), up from the 2.79 percent (y/y) pace in the preceding month but remaining at a comfortably low level for Indonesian standards. However, there are still some concerns that the La Nina weather phenomenon, which follows the strong El Nino earlier this year and brings wetter-than-usual conditions, can trigger higher food prices later this year.
The consumer confidence survey of Bank Indonesia is based on the response of 4,600 households across 18 Indonesian cities. Since November 2015 the central bank's consumer confidence has remained above 100 points, indicating optimism among Indonesian consumers.
Higher consumer confidence has a positive impact on household consumption. In Indonesia household consumption is the largest contributor to the country's gross domestic product (GDP), accounting for 55.9 percent of total growth.