CCI seen to further drop after Bali blasts

The Jakarta Post, Jakarta

After rising consistently for the last seven months, consumer confidence decreased in September owing primarily to price increases and faces an even bleaker outlook this month following the horrific Bali bombs attacks, Danareksa Research Institute has reported.

"In September, that is before the Bali bomb blasts, the CCI already posted a slide on the heels of price increases sparked by rising fuel and electricity prices," Danareksa analyst David Sumual said on Thursday, referring to the consumer confidence index.

"And now after the incident, the index is expected to further decrease," he said.

The CCI fell to 98.5 in September compared to 100.4 points in the previous month, the firm said in its latest report.

The confidence of households with monthly incomes below Rp 1 million was fading and their intention to purchase durable goods also was dwindling.

However, the sentiments of families with monthly incomes of above Rp 1 million improved with their will to buy durable goods unaffected by the price increases and even increasing a little.

"Lower-income families were hit hard by escalating fuel and electricity prices since the beginning of the year and a fall in interest income in light of the downtrend in deposit rates," the report said.

At the beginning of the year, the government raised fuel and electricity prices to compensate for lower subsidies allocated in the state budget.

While fuel prices have been adjusted every month with the international price, electricity rates have been raised every quarter.

The figures should cast a shadow on hopes for robust domestic consumption, which is expected to remain the main driver of the country's economic growth this year amid a slump in investment and exports.

The survey also showed that in September, the public were more downbeat about the pace of economic recovery, with their confidence in recent economic development dropping by 4.5 percent to 79.4.

The government has targeted four percent growth this year, primarily on the back of strong consumer consumption.

David predicted that consumer confidence would be further hit following the Bali bomb blasts, which claimed more than 190 lives.

"In the September survey, you can see that confidence dropped mainly because of the low-income families who were affected by the hike in fuel and electricity prices.

"I fear that the index will be much lower in October, because the Bali incident would not just affect the confidence of low- income families but also the high-income group. So, I think the index will continue to drop in October," David said.

The monthly survey was jointly conducted by Danareksa and AC Nielsen, which interviewed 1,700 households in six main areas in the country.

The index ranges from a score of zero to 200, with zero meaning very pessimistic and 200 very optimistic. If the index is below 100, pessimistic responses outnumber optimistic ones. if the index is above 100, the reverse is true.