Wed, 18 Oct 2006
BI finds consumer confidence improving

The Jakarta Post, Jakarta

Consumer confidence rebounded slightly in September, the latest survey from the central bank shows, as more people said they expect rises in their incomes and better employment prospects.

The encouraging findings are tempered, however, by expectations that the prices of goods and services will continue increasing up until the year's end, and the fact that consumer confidence has not yet returned to an optimistic level.

The country's consumer confidence index for September rose by 3 points to 96.1, Bank Indonesia said in a report on the survey. This figure is still below the 100-point benchmark that signifies optimism.

The index had dropped by 2.4 points to 93.1 in August after consistently rising from 87.9 points in April. It last surpassed the 100 mark in June of last year at 101.7.

The consumer confidence index, which is compiled monthly, is based on a survey on 4,365 households in 16 of the country's major cities, and reflects the mood of consumers as regards current macroeconomic conditions, as well as their expectations about the economic situation ahead, future earnings and planned purchases of major durable goods.

The current economic situation index rose by 3.4 points to 81.8 points, while the future economic expectations index was up 2.6 points at 110.5.

The BI survey showed that most consumers regard the current economic situation as being the same -- or even worse -- than six months earlier, with only 19 percent of the respondents saying it was better.

Looking ahead, however, nearly a quarter of the respondents expected the economy to improve over the next six months.

Indeed, several key indicators of the country's macroeconomic situation -- inflation and interest rates, in particular -- have been showing improvements lately.

On-year inflation slowed again in September to 14.55 percent, after surging to 17 percent due to last year's fuel price hikes. The central bank has also continued cutting rates, down to 10.75 percent at present, paving the way for more borrowing by consumers and businesses, which will spur growth.

In terms of earnings, the survey found that more than half of the respondents saw their current and future earnings staying the same.

However, an increasing number of people now say they expect higher earnings ahead -- a total of 39.2 percent of the respondents, up from 28.4 percent in August -- as employment prospects improve.

"The improved employment outlook is the result of a number of government-sponsored development projects that have started to kick in," the report said.

Most consumers are also confident that their purchasing power will improve on the back of a more stable rupiah, and interest earnings on their savings.

Any increases in income may, however, be undermined given that most consumers (64.5 percent) expect the prices of goods and services to rise over the next three months.

This has dissuaded many consumers from purchasing such big-ticket items as motorcycles, TV sets and computers, even though they say they plan to do so in the future.



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