Business slows, retailers book lower year-end sales

Business slows, retailers book lower year-end sales

The Jakarta Post, Jakarta

Holiday shoppers are spending less money this year due to
weaker consumption power, the Association of Indonesian Retailers
said on Wednesday, adding that total retail sales would likely
miss the 2002 target.

"Compared to last year, retail sales ahead of the holidays
aren't so good anymore. Business is slowing down," the
association's spokesperson Rudi Sumampow told The Jakarta Post.

According to him, consumers lack the spending power to match
last year's sales figures during the Idul Fitri and Christmas
holidays.

He gave no comparative figure but estimated overall sales to
have grown by just 10 percent this year. This is half the growth
rate the association had expected, he said.

"We expected that retail sales could grow to double the annual
inflation rate but now it's unlikely with this condition."

The annual inflation rate stood at 10.82 percent as of last
month. Inflation undermines consumer spending power if the rate
out paces growth in income.

But analysts said this year's rate was relatively modest given
that the government raised fuel prices, electricity and telephone
rates simultaneously last January.

New pricing schemes, introduced in that month, require fuel
prices to move in line with international market prices. Power
rates increase by an average of 6 percent every quarter.

Letting the market decide fuel prices, and the one-time
decision on the power rate hike has helped avoid the previous
jump in inflation every time the government announced plans to
raise fuel or power rates.

Still, Rudi blamed the triple price hike in January for
the plunge in consumer spending. Although the impact on inflation
has been modest, consumer' purchasing power took a direct hit
from the routine price hikes.

"People are more selective now in spending their money," Rudi
remarked.

This condition, he added, has forced manufacturers to cut back
on production for fear of oversupply. This has affected mainly
food producers, he said.

Rudi said retail sales in key tourist destination like Bali,
Yogyakarta and Jakarta have also weakened following the Bali
bombing in October.

"Retail sales in key tourist areas are our barometer to gauge
growth in the overall retail business," he explained.

The bomb blast that occurred in one of Bali's nightspots
crowded with foreign tourists, has shattered the country's
tourism industry.

Arrivals of foreign tourists, who make up the bulk of tourism
retail sales, plunged with no sight of a recovery as yet.

Rudi said that retail sales in Bali fell by 50 percent a month
after the bombing.

Weaker consumption power has also cast a pall over sales of
electronic goods this year.

The Association of Electronics Producers (Gabel) estimated
that sales of electronic goods would grow by just 10 percent this
year, far below the initial target of 25 percent.

It recorded a slump in the second half when sales should have
picked up. The association chairman Lee Khang-hyun said on
Tuesday that sales of television sets and refrigerators normally
soar during the festive season.

According to him, people were probably saving their money for
holiday trips after the government extended the Idul Fitri and
Christmas holidays.