Indonesian Consumer Confidence at 14-Month Low
Indonesian consumers have become less rosy in their view of the economy since the government raised the price of subsidized gasoline in June, a Bank Indonesia report revealed on Monday.
The central bank’s consumer confidence index, based on a survey of 4,600 households in 18 major cities, fell 8.7 points to 108 in July, the lowest level in 14 months. The index stood at 117 in June.
A score above 100 means consumers are generally optimistic about the economy.
The survey attributed the drop in July to higher fuel prices. When the government cut fuel subsidies in June, subsidized gasoline, branded as Premium, rose from Rp 4,500 to Rp 6,500 per liter while subsidized diesel went from Rp 4,500 to Rp 5,500.
Higher prices at the pump have a multiplier effect as traders tend to raise prices of goods to cover higher transportation costs.
Data from the Central Statistics Agency (BPS) showed that in July inflation accelerated to the highest level in more than four years. Meanwhile, the consumer price index rose 8.61 percent from a year earlier.
That compared to a 5.9 percent year-on-year gain in June.
The high cost of goods reduces the buying power of households, the main driver of Indonesia’s economy.
Inflation was a key reason that Bank Indonesia hiked its benchmark interest rate by 75 basis points across June and July, to 6.50 percent. The central bank retained that level for August, in an effort to preserve growth.
Bank Indonesia said that price pressures are expected to ease over coming months given Idul Fitri has passed.
The survey noted the hit to confidence following the fuel price rise was less than the hit following a similar price rise in 2008, when the CCI sunk to 73.1 points, its lowest level ever.
In May 2008 the government raised the price of Premium to Rp 6,000 a liter from Rp 4,500 a liter. It then cut it to Rp 4,500 in 2009, ahead of the presidential election.
The weakening rupiah and trade balance appear to pose further threats to the economy and consumer confidence.
The July fall followed the release of survey data last month that showed Indonesians consumers were the world’s most optimistic. Indonesia topped Nielsen’s Global Survey of Consumer Confidence rankings — with an index of 124 compared to a world average of 94.
Indonesia’s gross domestic product per capita has grown in recent years.
In 2004, its GDP per capita was $1,177, while five years later it has increased to $2,299 and rose to $3,592 last year. President Susilo Bambang Yudhoyono is aiming for GDP per capita to reach $5,000 next year.