Wed, 14 Jan 2009
From: The Jakarta Globe
By Ardian Wibisono
Bank Indonesia’s Consumer Confidence Index fell in December after rising for five consecutive months, indicating that Indonesians are finally waking up to a less-than-rosy picture of the economy.

“Based on a survey conducted in December 2008, the Consumer Confidence Index remained in pessimistic territory at 90.6 percent,” the central bank said in a statement dated Monday.

“It also showed that consumers were more pessimistic in December compared with the previous month, with the index falling by 5.7 points.”

An index result over 100 suggests optimism, with less than 100 indicating pessimism.

The survey involved respondents from 4,600 households in 18 cities. All respondents were randomly selected and the survey has a 2 percent margin of error.

An examination of the study’s subindexes shows that consumers were mostly negative in terms of both their current situation and expectations for the next six months.

With regard to personal income, consumers were cautiously upbeat about their current situation and future prospects.

But confidence in both of these areas still declined from the previous month, with confidence about current income falling to 110.8 from 113.1 and six-month confidence declining to 128.1 from 131.9.

Respondents were more negative, however, about working conditions and their present ability to buy long-term durable goods, with results of 60.2 and 64.3, respectively. These levels were sharply lower than November’s 68.4 points for work conditions and 70.5 for buying power .

Consumers were generally neutral about the six-month prospects for their economic conditions at a level of 104.1, a slight decrease from the previous month.

The greatest shift toward pessimism concerned employment prospects for the next six months, with confidence falling to 76.4 in December, a sizeable drop from the 87.6 reading in the November survey.

Increases in the country’s unemployment rate - currently estimated to be 10 percent - typically give rise to lower employment confidence.

The central bank said the declines in confidence were caused by increasing consumer anxiety about both current and future income levels and job availability. Slightly less optimism about the country’s economic future as a whole was also revealed in the results.

However, the survey also showed that fewer consumers expect prices to rise in the next six months, with that subindex dropping by 1.2 points. The decrease was likely caused by the falling price of fuel, which the government has cut three times since the beginning of December.

“The index’s decrease was mainly caused by a 6.1 point retreat in price expectations for housing, electricity and fuel, and a 4.2 point decline for transportation, communication and financial services costs,” Bank Indonesia’s statement said.

Destry Damayanti, an economist at PT Mandiri Sekuritas, said the survey suggested slowing domestic growth was leading to layoffs.

“As factors that cause income to fall - like job cuts or downsizing in industries - increase, it will take longer for prices to go down because of slowing demand,” she said.



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