Bleak retail sales in Indonesia are expected to continue in the second half of 2017 amid weak consumer purchasing power. Yongky Susilo, Executive Director at Retailer Services Nielsen Indonesia, expects the nation's retail sales growth to be be 6 percent year-on-year (y/y), tops. Normally, the growth pace of retail sales in Southeast Asia's largest economy averages 10 - 11 percent (y/y).
In the first half of the year Indonesian retail sales expanded by about 4 percent (y/y), unable to use the Ramadan and Idul Fitri momentum to boost sales significantly. According to data from Nielsen Indonesia, retail sales only rose 3 percent up to the third week of the fasting month (whereas in previous years sales would already have surged 10 percent by this time). However, there is optimism that the Christmas and New Year period toward the year-end can form a bigger boost for domestic retail sales.
Another occasion that may boost retail sales is a new event: Indonesia's Discount Shopping Day, to be held between 15 and 27 August 2017. This event is organized by the Indonesian Shopping Centers Tenants Association (Hippindo) due to the bleak conditions in the retail sector. By organizing this event they hope Indonesian consumers boost spending, hence retail sales. In all major shopping centers around Indonesia, consumers will be offered various discounts and promotion actions during this period.
Susilo says retail sales have been weak in Indonesia so far because purchasing power of the lower middle class segment is weak, while the higher middle class and elite segments of the population are still reluctant to boost spending. Higher inflation may also be a reason. Indonesian inflation accelerated to 4.37 percent (y/y) in June 2017.