Indonesian consumers are concerned about the looming subsidized fuel price hike this month according to the latest survey of Nielsen, a global information and measurement company. Based on the Nielsen Global Survey of Consumer Confidence and Spending Intentions (covering the third quarter of 2014), 28% of respondents said that higher prices of subsidized fuels are among their top two main concerns. In the previous survey (which covered Q2-2014), the subsidized fuel price hike was not even mentioned among the top five concerns.
Instead, in the previous survey, the top concern of Indonesian consumers was the general condition of the economy.
Higher subsidized fuel prices (gasoline and diesel) will result in accelerated inflation for a period of three months and thus limit people’s purchasing power. The government previously repeatedly stated that these prices will be raised in November 2014 (although no exact timing has been given yet). Ahead of the looming price hike, Indonesian consumers are already thinking about possible changes in their future expenditures in order to cope with or adjust to higher inflation. For example, such concerns may lead to the postponement of a car, motorcycle, or house purchase.
The last time when the Indonesian government raised prices of subsidized fuels (June 2013), the consumer confidence index declined four points from 124 to 120 in the third quarter of 2013. It took six months before the index had recovered to 124.
Despite heightened fuel price concerns, Indonesian consumer confidence was at 125 points in Q3-2014 (from 123 in the previous quarter), thus being the world’s second-most optimistic consumer force (after India). The main reason for this improvement is political certainty. In the previous quarters, the close battle between Joko Widodo and Prabowo Subianto (as well as a fragmented result in the April legislative election) caused a significant amount of uncertainty about the country’s political conditions, and even about the condition of democracy in Southeast Asia’s largest economy.
The survey of Nielsen is based on data from over 30,000 respondents in 60 countries through an online survey. A score above 100 indicates optimism.
Nielsen's Consumer Confidence Index:
| 4. Thailand
|6. Hong Kong||107|
|8. New Zealand||102|
Source: Nielsen Company
• Indonesian consumers are concerned about the looming subsidized fuel price hike (expected in November 2014) and are adjusting their future spending to cope with higher fuel prices (and higher inflation)
• Indonesia’s consumer force is the second-most optimistic consumer force in the world
• In the third quarter of 2014, Indonesia’s consumer confidence improved due to heightened political certainty