Consumer confidence up in March: Survey

Debbie A. Lubis, The Jakarta Post, Jakarta

Consumer confidence rose for a second consecutive month in March, indicating a shift in consumer sentiment from pessimism to optimism over the country's economic recovery, Danareksa Research Institute said in its latest monthly survey released on Thursday.

Danareksa said that the consumer confidence index edged up to 93 from 89.5.

It said that the rise was followed by an increase in both the present situation index and the expectation index.

Danareksa said that the present situation index rose by nearly 5 percent to 72.4 last month, reflecting stronger conviction that the economy was on the rise.

The institute said the expectation index climbed nearly four points to 108.6 last month compared to 104.7 in the previous month as consumers felt confident that the existing orderly state of affairs would continue to provide an impetus for economic growth.

The government is targeting an economic growth of 4 percent this year, to be driven mainly by consumer spending as export and investment are expected to slowdown amid the weak global economic conditions.

Danareksa said that perception of an upward trend in the economy had caused self-reinforcing and self-justifying forces which created "a liquid and busy economy."

It added that sanguine consumers spend more, reactivating the circular flow of funds from consumers to producers through a chain of retailers and wholesalers.

"...the rest of consumers would follow suit to join the bandwagon in lemming-like behavior that would galvanize public opinion on an economic recovery," Danareksa said.

The institute surveyed some 1,700 households across six different areas to measure the buying mood of consumers and predict their buying patterns that affected the country's economy.

The survey, however, said the government should preclude public doubts about economic recovery as the consumer confidence in the government stayed virtually unchanged at 114.9, after a steady decline since August 2001.

"If people are dissatisfied with the way matters are developing, bearish sentiment will come to the fore and the upturn will turn into a downturn, especially when overriding fears of the uncertain future overwhelm the environment and arouse the precautionary instinct of consumers" Danareksa said.

It added that the fears would encourage consumers to take a fast exit from the economic system, causing liquidity to dry up and spending to dwindle.