Mon, 12 Jul 2010

From: The Jakarta Globe

By Dion Bisara
Two surveys have given opposing pictures of Indonesian consumer sentiment, with one reporting growing optimism on the back of recent salary bonuses for civil servants, while another showed pessimism as rising food prices discouraged spending.

A monthly survey from Bank Indonesia released on Saturday showed that the Consumer Confidence Index rose by 1.5 points in June to 111.4, up from May when it slipped 0.8 of a point to 109.9. A score of more than 100 indicates confidence in the economy.

The central bank said growing concern over rising prices in the next six months was offset by civil servants receiving their annual salary bonus in June, lifting spending prospects.

“It was reflected by the rebound in the index,” the bank said in a statement.

The government paid an additional month’s salary for civil servants and members of the Indonesian Armed Forces (TNI) in June, as well as disbursing a pension bonus to government retirees. Private-sector workers generally collect a one-month bonus from their employers during the Islamic fasting month of Ramadan, which begins in August this year.

The central bank’s Current Economic Condition Index, a component of the CCI, also rose 1.5 points to 101.5 in June as respondents reported improving job prospects. The June results were the first optimistic reading for the CECI since August.

The Consumer Expectation Index, another part of the broader survey, climbed 1.5 points to 121.3 on respondents’ optimism that income and job availability would increase in the second half of the year.

“Respondents are optimistic that their income in the next six months will improve,” Bank Indonesia said, adding that consumers also planned to save more money over the second half as their earnings rose.

Despite the optimism, consumers also saw inflationary pressures rising over the next three to six months, which were reflected by the Price Expectation Index.

Of major concern for consumers are Ramadan, Idul Fitri in September and the Christmas holidays at the end of the year, Bank Indonesia said, adding that rising prices for clothing, transportation, communications and financial services were foremost on respondents’ minds. The overall CCI survey polled 4,600 households from 18 cities.

Another survey conducted by Danareksa Research Institute, a unit of state brokerage PT Danereksa, showed consumer confidence falling 2.4 points to 86.7 in June, the lowest level in four months, as rising food prices made consumers think twice about spending on other items.

“More than 50 percent of consumers said rising food prices had burdened their lives.

“As a consequence, they felt less optimistic about prospects for the economy. More than 90 percent of consumers surveyed felt sure that prices would increase further in the next six months,” the report said.

The Central Statistics Agency (BPS) reported last week that year-on-year inflation in June was 5.05 percent, compared with 4.16 percent in May, rising for a third-straight month to its highest level in a year.

The cost of rice, a staple, rose 5 percent to Rp 8,500 (90 cents) a kilogram in June, according to data from PT Food Station Tjipinang Jaya, the country’s grain buyer.

According to the survey, 21.7 percent of respondents said they planned to buy durable goods over the next six months, down from 28.2 percent in May’s report. DRI’s June survey polled 1,700 households in six regions.