Consumer spending to remain robust

Consumer spending to remain robust

Dadan Wijaksana, The Jakarta Post, Jakarta

A stable macroeconomic condition would continue to drive consumer
spending up in the second semester of this year, with demands on
items such as electronics, motorcycles and cars to remain
buoyant, experts said.

The Indonesian Automotive Industry Association (Gaikindo) and
the Indonesian Motorcycle Industry Association (AISI) predicted
that demands would remain robust for the rest of the year even
after strong sales in the first half.

AISI deputy chairman Gunadi Sindhuwinata said the strong
demand for motorcycles are such that the industry would have to
speed up its production just to keep up.

"To anticipate the strong demand, over 2.5 million
(motorcycles) would be produced this year," Gunadi said over the
weekend.

In the first six months, motorcycles sales reached 1.06
million units, or almost less than a 50 percent increase from the
same period of last year, which stood at some 660.000 units.

Gaikindo chairman Bambang Trisulo concurred, saying that the
association was optimistic to be able to post a second semester
sales volume at least at the same figure it had recorded in the
first semester, which was around 158.000 unit of cars.

"That would go in line with the association target to push the
cars sales into 320.000 unit by year-end," Bambang said. Last
year, the total cars sales volume reached almost 300.000 units.

The two agreed however that a stable macroeconomics
indicators, as it has been since the beginning of the year, would
played big part in either flourishing or disrupting the trend.

The country's macroeconomic condition has been relatively
stable during the first six months period, although there is now
some fears that the rupiah could weaken again as a result of
strong demands from companies to repay foreign debts. A drop in
the value of the rupiah against the U.S. dollar could trigger
inflation because the country's production system is heavily
dependent on imported raw materials. This would in turn eat up
into the people's purchasing power.

A stable exchange rate should then be maintained, as it would
greatly help check inflationary pressure.

Not only will a lower inflation give only little pressure on
the prices, but will also force the central bank to lower its
bench-mark interest rate.

A lower interest rate would encourage the people to spend
their money on goods rather than saving in the banks.

All this would spur well to the current trend of high consumer
spending, the backbone of domestic consumption, which has been
expected to become the main engine for this year's 4 percent
economic growth amid disappointing foreign direct investment and
export performance.

So it is crucial to retain all those supporting factors.

Exports dipped to US$22.285 billion between January and May
from $24.503 billion in the same period of last year.

Foreign direct investment (FDI) approvals plunged by 59
percent to $1.67 billion from $3.98 billion posted during the
same period last year. Domestic investment also showed a drop in
approvals during the same period from Rp 12.7 trillion in 2000 to
Rp 9.4 trillion last year.

Lee Kang-hyun, an executive at the Indonesian Electronics
Producers Association (Gabel), was also optimistic that
electronics sales would be increasing in line with rising demand
as costumers feel they better off spending their money than keep
it banks.

Gabel expects sales of TV, refrigerators, washing machines and
other home appliances would be on the increasing trend.