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.