Tue, 10 Apr 2007
From: The Jakarta Post
By The Jakarta Post, Jakarta
Indonesian consumers have become more confident about the economy, while at the same time seeing risks ahead, the latest survey by the central bank shows.

Bank Indonesia's Consumer Confidence Index rose 0.9 in March to 93.3, marking the first clear-cut revival of optimism in the country's economy since November last year. The index had declined continuously from 101.6 that month to 92.4 in February.

However, March's overall index, which reflects how consumers perceive current economic conditions, and their expectations for the future, does not yet reveal a complete banishing of pessimism, which would be shown by a reading of more than 100.

Of the 4,650 households in 18 major cities across the country that were surveyed last month, only those in Makassar, Manado, Medan and Pontianak were fully confident about the outlook for the economy.

Regarding their current economic well-being and comparing this with six months before, consumers said they were benefiting from higher incomes, more job opportunities, and the ability to buy more durable goods -- all of which translated into a rise of 2.3 in the Present Economic Situation Index to 81.6.

Consumers were particularly happy with their present incomes, the index for which rose to 114.4, while the employment and ability to purchase goods categories came in at 70.6 and 59.7, respectively.

Looking ahead, consumers said that economic conditions were likely to further improve, but were unsure about how better things would become, with the Six-Months Consumer Expectation Index slipping 0.5 to 105.1.

In addition, fewer consumers expected their incomes to increase within the next six months, resulting in the index for this category falling 2.4 points to 128.7.

Over the longer term, more than half of the consumers surveyed said that the economy was likely to tread water ahead, neither becoming better nor worse, which resulted in the One-Year Expectation Index rising only slightly by 0.9 points to 101.9.

Consumers also expected the prices of processed foodstuffs and clothing to rise in the next six months, although interest rates in Indonesia's consumption-driven economy would likely remain stable.

The central bank referred to a possible rise in inflationary pressures and expectations ahead when it decided to hold its key BI rate at 9 percent last week.

The inflation figures for March turned out mixed, with the rate of price rises slowing on a monthly basis to 0.24 percent, but rising on-year to 6.52 percent.

The slowdown in inflation and BI's rate cuts have not yet translated into higher growth as a result of the myriad problems still plaguing the country's investment climate.

First-quarter growth this year will likely come in at 5.4 percent, BI has said, lower than 2006's full-year growth of 5.5 percent.



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