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.