Consumer confidence drops

The Jakarta Post, Jakarta

Indonesian consumer confidence fell in July compared to the month before, primarily due to utility price hikes, the latest survey by the Danareksa Research Institute revealed on Thursday.

The consumer confidence index (CCI) slipped to 91.7 percent in the month, a drop from 95.3 percent posted in June, the survey said.

"The (utility price) hikes, that appear poised to drive other prices up will, in the end, translate into thinner pockets," Danareksa said.

The government has a policy to increase electricity prices every quarter by an average of 6 percent. It recently also raised the price of liquid petroleum gas (LPG).

"That hurts sentiment of people across the nation, both in rural and urban areas," Danareksa said, adding that pessimists in rural areas were more apparent as they had to struggle harder to cope with the impacts of the ongoing drought in some parts of the country.

However, the survey said, although confidence fell in July, confidence in the overall economy was mostly unchanged as most were apparently heartened by continuing stability in the country's macroeconomic indicators.

While the rupiah remains relatively stable and Bank Indonesia keeps inching its benchmark interest rate downward, of even greater significance for consumers was the lower inflation rate. During the first seven months of the year, inflation stood at a historic low of 1.29 percent.

The favorable conditions should help increase consumers' appetite for durable goods in the coming months.

All of these indicators increased the confidence of consumers in the government to steer the economy, which should bode well for hopes of continued robust consumption, which has been the main driver of the country's economic growth during the past couple of years.

The Danareksa report added that the fall in sentiment was more psychological, with relatively no major impact on the economy.

"The fall is just a reflection of consumers' displeasure in regard to higher monthly bills for electricity and LPG in addition to a larger-than-usual cost for educational purposes at the beginning of the new academic year," it said.

The Danareksa survey was conducted in cooperation with AC Nielsen, which interviewed 1,700 households in six key areas of the country.

Based on face-to-face interviewing, the national survey uses sampling which is scientifically selected to accurately represent Indonesian consumer characteristics -- demographically and economically.