BI: Increased Consumer Confidence in the Economy

Consumer confidence increased in May compared to the previous month, as consumer perceptions of the current economic condition and the expected condition over the next six months improved.

This was reflected in the results of a Bank Indonesia (BI) survey, which indicated that the Consumer Confidence Index (CCI) in May was 112.1 points, up 3.1 points on the previous month. The CCI is a monthly survey of 4,600 households in 18 major cities across Indonesia that has been conducted by the central bank since 1999.

Contributing to this increased consumer optimism was the current Economic Condition Index (ECI), which rose 1.8 points to 96.5 in May. While all variables of the ECI improved, the income index recorded the highest increase of 3.9 points to 114.8.

Meanwhile, the job opportunity index and timely purchase of durable goods index also rallied in May by 0.7 points and 0.8 points, respectively, compared to the previous month. The ECI increased in 12 cities in May, with the highest increase in Banjarmasin.

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This was reflected in the 4.5 rise in the Consumer Expectation Index (CEI) to 127.7 in May, as all components of the CEI rallied.

The job availability component of the CEI climbed 5.8 points to 110.8, followed by the income and six-month business activity indices, which increased 3.6 points and 4 points, respectively.

(Read: Economy Still Slow, BI to Loosen Credit Regulation)

Meanwhile, the rising trend in prices in June and July is expected to slow in August, as indicated by the Price Expectation Index (PEI) for the next three months (June - August), which dipped by 2.7 points to 171.3.

Price increases are expected to slow for the food and beverages, cigarettes and tobacco and foodstuff sectors. “The expectation of increasing prices will decrease as consumer demand returns to normal after the Eid al-Fitr celebrations,” said a BI official in a press release, Wednesday (8/6).

This was reflected in the 7.2 point rise in the six-month PEI to 164.9.

(Read: Finance Minister, BI: 13^th, 14^th Civil Servant Salaries to Drive Third Quarter Consumption)

Meanwhile, the portion of people’s incomes used for consumption increased 0.8 percent in May to 69.6 percent. The ratio of savings to income and of debt repayments to income decreased 0.6 percent and 0.3 percent.

For the next six months, consumers project an increase in savings compared to previous month. This is indicated by the 3.4 point rise in the index of estimated savings in the next six months (November 2016) to 126.2. The index of estimated loans for the next six months was also up 1.1 points to 161.1.