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Today's Headlines Purchasing Power

  • Non-Taxable Threshold for Personal Income Tax in Indonesia to be Raised?

    Bambang Brodjonegoro, Indonesian Finance Minister, announced on Wednesday (27/05) that the Indonesian government may raise the income threshold - which separates individuals’ income that is taxable from non-taxable income - by almost 50 percent. Although this move would imply less tax revenue for the government, it would strengthen the purchasing power of the less fortunate Indonesians and can somewhat boost economic activity in an economy that has been plagued by slowing economic growth since 2011.

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  • Indonesian Motorcycle Producers Curb Production on Purchasing Power

    Similar to the automotive industry, Indonesia’s motorcycle industry also feels the effects of lower demand so far this year. Due to Indonesia’s slowing economic growth in combination with the high domestic interest rate and depreciating rupiah, Indonesians’ purchasing power has weakened and thus Indonesian consumers have become more careful before purchasing motorcycles and cars. As a result stocks of motorcycles at local dealers have been rising and one way to have a healthier supply-demand ratio is by limiting motorcycle production.

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  • Car Sales Indonesia 2015: Declining amid Slowing Economic Growth

    The Indonesian Automotive Manufacturers Association (Gaikindo) lowered its car sales target for 2015 to 1.1 million vehicles, down from its original sales target of 1.2 million vehicles, due to persistent slowing economic growth in Indonesia (curbing consumer demand). On Tuesday (05/05), Statistics Indonesia announced that the country’s economic growth slowed to 4.71 percent (y/y) in the first quarter of 2015, a five-year low. Other important factors that negatively influence car sales are inflation, the interest rate, the rupiah, and fuel prices.

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  • Economic Update Indonesia: Car & Cement Sales in First Quarter 2015

    Two important indicators to measure the condition of an economy are car and cement sales as both statistics provide valuable information about people’s purchasing power (and consumer confidence) as well as infrastructure and property development. In the first quarter of 2015, Indonesia’s car and cement sales declined (compared to the same period in the preceding year), triggering concern that economic growth will fall accordingly. In the first quarter of 2014, Indonesia’s GDP growth had already slowed to 5.14 percent (y/y).

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  • Indonesia Update: Retail Sales, Cement Sales & Motorcycle Sales

    According to the latest survey of Bank Indonesia (the central bank of Indonesia), the country’s January retail sales accelerated 10.4 percent year-on-year (y/y), up from the 3.3 percentage point growth pace (y/y) in the preceding month. Retail sales in the first month of the year in Southeast Asia’s largest economy accelerated because of higher sales of information & communication equipment (+29.9 percent y/y) as well as food, beverages & tobacco products (+15.1 percent y/y).

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  • Stock Market Update: Why Do Indonesian Stocks Hit a Record High?

    The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated JCI or IHSG) posted a series of consecutive record high closes during the past week, primarily on the central bank’s (Bank Indonesia) decision to cut its key interest rate (BI rate) by 25 basis points to 7.50 percent, investors’ positive outlook on Indonesian companies’ corporate earnings in 2015 and expectation that the Eurozone’s quantitative easing program will offset the negative impact of monetary tightening in the USA.

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  • Car Sales Industry Indonesia - What are the Forecasts for 2015?

    Based on preliminary data, domestic car sales in Indonesia fell 7.2 percent (y/y) to 96,149 vehicles in January 2015 from the same month in 2014. It is believed that the recent (subsidized) fuel price reforms, implemented by the Joko Widodo administration in November and January (which led to accelerated inflation), have made consumers hesitant to buy a car. Car sales are an important indicator to measure consumer confidence and the general state of the economy. In general, when car sales rise the economy is growing.

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  • Indonesia’s 2014 Car Sales Decline amid Slowing Economic Growth

    Domestic car sales in Indonesia were slightly down in 2014 compared to the previous year. Amid the slowing economy (Indonesia’s GDP growth may have fallen from 5.8 percent in 2013 to 5.1 percent in 2014) and political uncertainty (triggered by the fragmented results of the country’s legislative and presidential elections) car sales totaled 1.21 million units in 2014, down 1.8 percent from 1.23 million sold vehicles in 2013, according to the latest data from the Indonesian Automotive Industry Association (Gaikindo).

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  • Indonesia's 2014 Annual Car Sales Fall on Bleak Economy & Fuel Hike

    Domestic car sales in Indonesia declined 15 percent to 91,449 vehicles in November 2014 (from the same month last year). Declining car sales in Southeast Asia’s largest economy are believed to be caused by the recent subsidized fuel price hike. In mid-November the Joko Widodo-led government raised prices of subsidized fuels (low-octane gasoline and diesel) over 30 percent in order to reduce state spending on fuel consumption and reallocate funds to structural economic and social development.

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  • What are the Minimum Wages in Indonesia in 2015?

    A total of 29 Indonesian provinces have already confirmed their new provincial minimum wages for the year 2015. Overall (excluding the four remaining provinces), the average Indonesian minimum wage rises 12.77 percent (y/y) in 2015. Although this growth is considerable, it is smaller than Indonesia’s minimum wage growth in 2014 (19.10 percent y/y). The highest minimum wage growth occurred in the province of Bangka Belitung (28 percent), while the lowest wage increase was in Riau (0.58 percent).

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Latest Columns Purchasing Power

  • A Quick Look at Indonesia's Largest Listed Retail Businesses

    Indonesian retail businesses are optimistic that their performance will improve in 2016 on the back of rising purchasing power amid the government's decision to cut energy tariffs (fuel and electricity) and its plan to raise non-taxable income by 50 percent. These moves mean that Indonesian consumers (particularly in the lower middle class segment) should have more money to spend. Tutum Rahanta, Deputy Chairman of the Indonesian Retailers Association (Aprindo), says retail business can grow by 12 - 15 percent (y/y) in 2016, considerably higher than the 7 - 8 percent (y/y) growth pace realized last year.

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  • Unilever Indonesia to Rebound along with the Overall Economy?

    In 2015 Unilever Indonesia's net profit declined 1.2 percent (y/y) to IDR 5.85 trillion (approx. USD $443 million) due to weakened purchasing power of Indonesian consumers amid the economic slowdown. Last year Indonesia's GDP growth touched the six-year low of 4.79 percent (y/y). This year, however, economic growth is estimated to accelerate beyond the 5.0 percent (y/y) mark. Unilever Indonesia is a leading consumer goods producer in Indonesia that is mainly focused on home & personal care products as well as foods & refreshment products. How about its performance in 2016?

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  • Car, Motorcycle & Cement Sales: Assessing Indonesia's Purchasing Power

    To assess Indonesia's purchasing power and consumer confidence it is always useful to take a look at car and motorcycle sales because when people are confident about their financial situation and have enough money to spend then they tend to buy cars and motorcycles (motorcycles are particularly popular among Indonesia's huge middle to lower-middle class segment). Meanwhile, cement sales inform about property and infrastructure development. Property development is also closely related to purchasing power and consumer confidence because property development grows when people's demand for property rises.

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  • Outlook Indonesia's Car Sales in 2016: Optimistic or Pessimistic?

    Whereas the Indonesian Automotive Industry Association (Gaikindo), expects Indonesia's car sales to rise five percent (y/y) in 2016 on the back of improving economic conditions, US-based consulting firm Frost & Sullivan expects to see a 4.3 percent decline in the country's car sales this year as continued rupiah depreciation and persistently low commodity prices undermine Indonesians' purchasing power.

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  • Indonesia's Car & Motorcycle Sales Fell Sharply in 2015

    Both car sales and motorcycle sales declined in 2015 in Indonesia. Primary reason for this decline was people's weaker purchasing power amid the slowing economy and persistently low commodity prices. Indonesia's GDP growth is estimated to have fallen to 4.7 percent year-on-year (y/y), the slowest growth pace since 2009. Meanwhile, amid the sluggish global economy (especially China's slowdown) and falling oil prices, Indonesia gains relatively little from its commodity exports.

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  • Performance of Indonesia's Astra International to Improve in 2016?

    The performance of Astra International, one of Indonesia's leading diversified conglomerates (but particularly known for being the dominant force in the country's automotive industry), is expected to improve next year on the arrival of new car models, estimated accelerated economic growth and its rivals' stagnating production capacity expansion. As such, Astra International should be able to increase its market share and feel less need to offer its cars to customers at discounted rates.

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  • Ace Hardware Indonesia Plagued by Weak Rupiah & Purchasing Power

    Ace Hardware Indonesia, one of Indonesia's leading retail companies that is engaged in the markets of home improvement and lifestyle products, is expected to show modest (single-digit) growth in 2016. Same store sales growth is estimated to grow in the range of 8-10 percent year-on-year (y/y). This modest performance is caused by weak purchasing power in Indonesia amid sluggish economic growth and due to the fragile rupiah (against the US dollar).

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  • Analyst Opinion: Indonesia Should Focus on Boosting Purchasing Power

    An Indonesian analyst says the Indonesian government needs to increase efforts to boost people's purchasing power in order to achieve the government's economic growth target of 5.3 percent in 2016. Household consumption in Indonesia accounts for about 55 percent of the nation's total gross domestic product (GDP) growth. As such, if purchasing power continues to weaken, then the economic slowdown returns. The analyst suggests the government should consider to cut personal and corporate income taxes, delay the electricity tariff hike for 900 VA households, and lower fuel prices.

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  • Automotive Market Indonesia: Car Sales to Rebound in 2016

    Indonesian car sales may rise up to ten percent (y/y) to 1.1 million vehicles in 2016, from an estimated 1 million this year, amid accelerating economic growth in Indonesia. Car sales in 2015 have been disappointing, declining 18 percent (y/y) to 853,008 units in the first ten months of 2015, due to people's weakening purchasing power. Sales in 2016 are expected to be boosted by sales of the low-cost green car (LCGC), which was introduced on the Indonesian market in late-2013, and the crossover utility vehicle, a car that has gained popularity recently.

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  • Indonesian Government Revises Luxury Goods Tax to Boost Consumption

    In an attempt to boost the sluggish domestic economy by persuading Indonesian consumers to spend more, the central government of Indonesia will exempt several products from the luxury goods sales tax. By law, Indonesia has a tax (ranging between 10 and 50 percent) on goods that are categorized as luxury goods. These products include household items such as televisions, electronics, furniture, refrigerators, washing machines, water heaters as well as cars, motorcycles and property.

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