Consumer confidence continues to rise: Danareksa

The Jakarta Post, Jakarta

Consumer confidence in Indonesia rose for the third consecutive month in April, as economic fundamentals improved and consumers placed more faith in the government's ability to spur growth, according to a survey.

The Danareksa Research Institute, which conducted the survey, said the consumer confidence index (CCI) rose by 62 percent in April to 98.8 from 93.0 in March, with both the present situation index and the expectation index on the uptick.

The improved CCI "offers tangible evidence of a recovery story in the economy that justifies higher consumer optimism toward the government", the institute said in a statement.

Confidence in the government increased for the first time since Sept. 11, rising 2.5 percent to 117.7 in April, as consumers placed greater confidence in the government's ability to improve their welfare.

In particular, respondents cited the government's ability to spur economic growth as giving them hope for a fall in unemployment.

The 12.4 percent increase in the present situation index was mainly the result of a 15.5 percent rise in sentiment about the job market, with consumers now less worried about being laid off.

There was also a marked increase in optimism about the future as the economic recovery gathers pace, with all of the components of the expectation index showing picking up.

To compile the CCI every month, Danareksa and AC Nielsen interview at least 1,700 Indonesian households in six main areas across 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.

Danareksa noted that despite the rise in April, consumer confidence was still below 100. But the major upswing in sentiment means that confidence is now on "the threshold of optimism".

On the back of rising optimism, the percentage of respondents who said they were ready to purchase durable items in the next six months rose to 23.1 percent from 22.6 percent the previous month.

This increase will further strengthen the conviction that the economic fundamentals of the country are catching up with the upbeat confidence.

A prime catalyst for the strengthening fundamentals was a combination of lower interest rates and a stronger rupiah, Danareksa said.

The weighted average interest rate on Bank Indonesia's one- month SBI promissory note was 15.81 percent at last week's auction, compared to above 18 percent toward the end of last year. The rupiah continued to rise on Tuesday, closing at Rp 8,870 compared to about Rp 10,500 at the end of last year.