Consumers Remain Upbeat in January

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Gerald Weaver
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1 M O N T H L Y R E P O R T R i D A N A R E K S A R E S E A R C H I N S T I T U T E R i/1307/cc/2017 C O N S U M E R February 2018 Consumers Remain Upbeat in January Consumer Confidence stood unchanged in January In this month, the Consumer Confidence Index (CCI) stayed at Our survey reveals that while consumers gave less positive assessments on current national economic conditions, they are still optimistic toward the future. In particular, consumers are more upbeat toward their family incomes over the next six months, as well as the outlook for the local economy and the job market. Of the two main components which make up the CCI, one increased and the other declined. The component measuring consumer sentiment toward current conditions, the Present Situations Index (PSI), dipped 0.7 percent to 83.9, as sentiment toward the current state of the national economy deteriorated in January As for the other main component of the CCI - the one measuring consumer sentiment toward the future (the Expectations Index or EI) it climbed 0.4 percent to The increase in this index reflects stronger consumer optimism toward the local economy and the job market outlook over the next six months. However, consumers were less upbeat on the national economic outlook. With consumers less upbeat on the national economic outlook, buying intentions for durable goods also declined in January In our survey, percent of consumers expressed plans to purchase a durable good over the next six months, or down from percent in the previous month. Nevertheless, on a yearly comparison, buying intentions for durable goods are still higher since percent of consumers expressed plans to purchase a durable good back in January ASTI SUWARNI Analyst (62-21) / 888 ext 3608 asti@danareksa.com MARTIN JENKINS Analyst (62-21) / 888 ext 3609 martin@danareksa.com Consumer confidence in the government s ability to carry out its duties weakened in the January 2018 survey. After edging down 0.4 percent in the previous survey, the Consumer Confidence in the Government Index (CCGI) retreated 2.5 percent from to in January In our survey, four components of the CCGI declined while one component increased. Nonetheless, four CCGI components are still above the neutral level of 100, thereby indicating that consumers are generally convinced in the government s ability to carry out its duties.

2 THE JANUARY 2018 RESULTS Consumer Confidence stood unchanged in January In this month, the Consumer Confidence Index (CCI) stayed at Our survey reveals that while consumers gave less positive assessments on current national economic conditions, they are still optimistic toward the future. In particular, consumers are more upbeat toward their family incomes over the next six months, as well as the outlook for the local economy and the job market. Of the two main components which make up the CCI, one increased and the other declined. The component measuring consumer sentiment toward current conditions, the Present Situations Index (PSI), dipped 0.7 percent to 83.9, as sentiment toward the current state of the national economy deteriorated in January As for the other main component of the CCI - the one measuring consumer sentiment toward the future (the Expectations Index or EI) it climbed 0.4 percent to The increase in this index reflects stronger consumer optimism toward the local economic and the job market outlook over the next six months. By region, consumer confidence improved in three of the six regions covered by the survey. Sentiment improved the most in West Java (where the index added 2.8 percent to 95.3 in January 2018), followed by Jakarta (where the index edged up 2.2 percent to 124.7), and South Sulawesi (where the index rose 1.3 percent to 103.1). By contrast, confidence still deteriorated in North Sumatra (where the index retreated 3.9 percent to 84.6 in January 2018), followed by East Java (where the index edged down 1.7 percent to 103.8), and Central Java (where the index slipped 1.0 percent to 106.9). The optimism of consumers in different income bands was mixed. For the high-income consumers (incomes above Rp3,000,000 per month), the CCI added 1.5 percent from to in January 2018, while for the low-income consumers (incomes below Rp1,500,000/month), the CCI retreated by 3.0 percent from 94.6 to Meanwhile, changes in confidence also varied between rural and urban areas. While the CCI for urban consumers climbed by 0.4 percent to in January 2018, the CCI for rural consumers fell by 0.9 percent to Chart 1. Consumer Confidence was Steady in January 110 Consumer Confidence Index Basic Food Price Hike Basic Food Price Hike 60 J-05 J-06 J-07 J-08 J-09 J-10 J-11 J-12 J-13 J-14 J-15 J-16 J-17 J-18

3 Chart 2. Urban Consumers were More Optimistic in January 110 Urban Areas Rural Areas Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Jul-16 Apr-17 Jan-18 Table 1. The Consumer Confidence Index % Change Consumer Confidence Present Situation Expectation Appraisals of Current Situations: Less Upbeat on the National Economy Consumers gave more negative assessments on the current state of the national economy in our latest survey (this index retreated 4.8 percent from 90.0 to 85.6 in January). In our survey, the proportion of consumers who claimed that national economic conditions were good declined from 21.6 percent to 20.0 percent, while the proportion of consumers who claimed that national economic conditions were bad increased from 31.6 percent to 34.4 percent. Nevertheless, a significant proportion of consumers (45.6 percent) said that national economic conditions were normal. In regard to the current state of the local economy, however, consumers gave more positive assessments (this index edged up 2.4 percent to in January). Consumers remained concerned by several key issues. Most notably, 74.9 percent of consumers still cited high foodstuff prices as a major factor weighing on the local economy in the last three months (up from 69.3 percent in December). Furthermore, 33.9 percent of consumers expressed concerns on job scarcity (up from 33.1 percent) and 9.0 percent of consumers mentioned crop failure as a worry (up from 2.4 percent). In the January survey, consumers also gave more positive assessments on the current state of the job market (the index measuring sentiment toward job market conditions climbed 0.2 percent to 63.0). More specifically, fewer consumers claimed that jobs were hard to get (55.3 percent in January vs percent in December) while around 18.3 percent of consumers claimed that jobs were easy to get. Some 26.2 percent of consumers did not perceive any change in the job market. Overall, the low level of this index still indicates that the job market remains tough and that greater efforts are needed to tackle the perennial problem of unemployment.

Table 2. Appraisal of Current Situations %Change Economic Conditions 87.7 89.0 91.1 90.0 85.6-4.8 Local Area Economic Conditions 105.0 103.8 103.4 100.6 103.1 2.4 Employment Conditions 57.5 59.9 56.

4 Table 2. Appraisal of Current Situations %Change Economic Conditions Local Area Economic Conditions Employment Conditions Chart 3. Key Concerns December 2017 Important factors that worsen local economic conditions in the past three months Januari 2018 Important factors that worsen local economic conditions in the past three months 6.1% 2.4% 7.8% 9.0% 12.8% 7.9% 69.3% 74.9% 33.9% 33.1% Increase in basic foodstuff prices Expensive and scarcity of fuel Crop Failure Job scarcity Natural Disasters Increase in basic foodstuff prices Expensive and scarcity of fuel Crop Failure Job scarcity Natural Disasters Assessments on Near-Term Conditions: More Upbeat on the Local Economic Outlook Looking ahead over the next six months, consumers are more optimistic: the Expectations Index (EI) edged up 0.4 percent to in January. Furthermore, three components of the EI increased and only one component declined. In January 2018, all components remain above the 100 level. This shows that consumers are generally still upbeat on the outlook for the economy and the job market over the next six months. The component of the EI to increase the most was the one measuring sentiment toward future family incomes. This component of the EI added 1.4 percent to in January. In our survey, more consumers expect higher family incomes over the next six months (23.6 percent in January 2018 vs 23.1 percent in December 2017) while the proportion of consumers who expect lower family incomes declined from 11.7 percent to 10.7 percent. However, most consumers (65.5 percent) still don t expect any change in the outlook for future family incomes. The stronger optimism toward the prospects for family incomes is inline with the expectation of a better job market in the future (this index edged up 0.3 percent to 106.7). In regard to the local economic outlook, consumers are also more optimistic (this index climbed 0.4 percent to in January). In more detail, our survey reveals that more consumers were upbeat on the local economic outlook (22.9 percent in January 2018 vs percent in December 2017) while around 3.4 percent of consumers were still downbeat. Nevertheless, a large proportion of consumers (73.3 percent) still foresee no change in the local economic outlook over the next six months. As for the national economy, however, consumers are slightly less upbeat on its prospects: this index slipped 0.5 percent to in January 2018.

5 Table 3. Expectations in the Six Months Ahead % Change Economic Prospects Local Area Economic Prospects Employment Prospects Family Income Prospects Purchasing Intentions for Durable Goods: Weakened With consumers less upbeat on the national economic outlook, buying intentions for durable goods also declined in January In our survey, percent of consumers expressed plans to purchase a durable good over the next six months, or down from percent in the previous month. Nevertheless, on a yearly comparison, buying intentions for durable goods are still higher since percent of consumers expressed plans to purchase a durable good back in January Of the ten categories tracked by our survey, however, buying intentions only declined in four of them. Most notably, buying intentions for livestock declined significantly from 1.33 percent in December 2017 to 0.64 percent in January Meanwhile, buying intentions for gold & jewelry and motorcycles declined moderately. In the January 2018 survey, the proportion of consumers who want to renovate their homes also declined (down from 2.96 percent to 2.15 percent). By contrast, buying intentions in six categories of goods still increased. Most notably, buying intentions for houses tripled from 0.46 percent in December 2017 to 1.45 percent in January Buying intentions for automobiles, bicycles, and land also increased significantly. Finally, buying intentions for audio-visual equipment and home appliances increased moderately from 4.64 percent to 4.76 percent and from 7.66 percent to 7.83 percent in January 2018, respectively. Table 4. Buying intensions Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Automobile Motorcycle Bicycle House House Renovation Land Audio-visual Home appliance Gold & jewelry Livestock

6 Expectations on Key Economic Variables: Inflationary Pressure is Expected to Ease In our latest survey, consumers said they expected inflationary pressures to ease slightly over the next six months. Overall, the index measuring consumer sentiment toward general prices slipped 0.8 percent from to in January Furthermore, this index is still lower than its level one year ago, when the index reached in January The expectation of easing inflationary pressures is unsurprising, however, since the prices of certain products, especially foodstuffs and clothing, usually adjust to their normal levels once the Christmas and New Year festivities have passed. Furthermore, the decline in this index may also be attributable to expectations that foodstuff prices will fall due to greater supply of foodstuffs because of the onset of the harvesting season in February. In regard to interest rates, fewer consumers foresee higher interest rates over the next six months (31.9 percent in January 2018 vs 34.7 percent in December 2017) while around 4.8 percent of consumers foresee lower interest rates. Nevertheless, a significant proportion of consumers (24.4 percent) still expect interest rates to remain unchanged. As such, overall, the index measuring sentiment toward interest rates retreated 1.2 percent to in January As for the rupiah, consumers in the main cities are less pessimistic on the outlook for the local currency. In our survey, the index measuring sentiment toward the rupiah added 3.8 percent to 73.2 in January In regard to the outlook for stock prices, consumers are also optimistic that Indonesian stocks will record gains over the next six months (this index climbed 3.4 percent to in January 2018). Table 5. Expectations on Prices % Change General Prices Expectation Interest Rates Expectation Exchange Rates Expectation Stock Prices Expectation

7 Confidence in the Government: Weakened Consumer confidence in the government s ability to carry out its duties weakened in the January 2018 survey. After edging down 0.4 percent in the previous survey, the Consumer Confidence in the Government Index (CCGI) retreated 2.5 percent from to in January In our survey, four components of the CCGI declined while one component increased. Nonetheless, four CCGI components are still above the neutral level of 100, thereby indicating that consumers are generally convinced in the government s ability to carry out its duties. The component of the CCGI to decline the most in January was the one measuring sentiment toward the government s ability to stabilize prices. This index retreated 7.6 percent from 84.2 to 77.8, its lowest level in the last 7 months. Also down was the component measuring sentiment toward the government s ability to provide and maintain public infrastructure. This index retreated 2.5 percent from its highest ever level of to in January. Consumers are also less convinced in the government s ability to ensure a safe and orderly environment. The relevant index dropped 2.4 percent from its highest level in the last 7 years of to in January Meanwhile, the component of the CCGI measuring sentiment toward the government s ability to enforce the rule of law also edged down 1.1 percent from to in January Note that perceptions of weak law enforcement have dragged down consumer sentiment toward the government in the past. By contrast, one component of the CCGI still increased in the January 2018 survey: the component of the CCGI measuring sentiment toward the government s ability to spur economic growth edged up 0.2 percent from to in January Table 6. Confidence Toward The Current Government %Change Recovery National Economy Stabilize the Price of Goods Provide and maintain public infrastructure Ensure a safe and orderly environment Enforce the rule of law CCGI * Note: Starting in April 2007, the Consumer Confidence in the Government Index (CCGI) has been adjusted to the year of 2003 = 100

8 TABLE 7. CCI - COMPOSITE SERIES CCI by Regions Dec-17 Jan-18 MoM %Change National Consumer Confidence Index Present Situation Expectations Jakarta Consumer Confidence Index Present Situation Expectations West Java Consumer Confidence Index Present Situation Expectations Central Java Consumer Confidence Index Present Situation Expectations East Java Consumer Confidence Index Present Situation Expectations North Sumatera Consumer Confidence Index Present Situation Expectations South Sulawesi Consumer Confidence Index Present Situation Expectations TABLE 8: NATIONAL FIGURES CCI by Classification RespondentDec-17 Jan-18 MoM Profile (%) %Change Age of Respondents and over Educational Level Primary School or less High School Academy/University Households Income under RP , Rp Rp ,- and over Type Area Urban Rural Gender Male Female Occupation Worker Self employed Unemployed * An index reading above 100 indicates that positives responses outnumber negative responses

9 RESEARCH TEAM Damhuri Nasution Kahlil Rowter Head of Economic Research Chief Economist Asti Suwarni Analyst Darwin Sitorus Economist / Database Officer darwin@danareksa.com Natalia Daisyana Research Assistant natalia@danareksa.com Rika Pantjawati Executive Secretary rikap@danareksa.com Pramayanti Meitisari Analyst pramayanti@danareksa.com Handri Thiono Junior Economist handrit@danareksa.com Martin Jenkins Editor martin@danareksa.com Wahyuni K. Handayani Junior Analyst wahyuni.handayani@danareksa.com Danareksa Research Institute Danareksa Building Jl. Medan Merdeka Selatan 14 Jakarta, INDONESIA Tel : (62-21) / 888 (hunting) Fax : (62 21) All rights reserved. No part of this publication may be reproduced, stored in retrieval systems, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Danareksa Research Institute. DISCLAIMER The information contained in this report has been taken from sources which we deem reliable. However, none of Danareksa Research Institute and/or its affiliated companies and/or their respective employees and/or agents makes any representation or warranty (express or implied) or accepts any responsibility or liability as to, or in relation to, the accuracy or completeness of the information and opinions contained in this report or as to any information contained in this report or any other such information or opinions remaining unchanged after the issue hereof.we have no responsibility to update this report in respect of events and circumstances occurring after the date of this report.we expressly disclaim any responsibility or liability (express or implied) of Danareksa Research Institute and/or its affiliated companies and/or their respective employees and/or agents whatsoever and howsoever arising (including, without limitation for any claims, proceedings, actions, suits, losses, expenses, damages or costs) which may be brought against or suffered by any person as a result of acting in reliance upon the whole or any part of the contents of this report and neither Danareksa Research Institute and/or its affiliated companies and/ or their respective employees and/or agents accepts liability for any errors, omissions or mis-statements, negligent or otherwise, in this report and any liability in respect of this report or any inaccuracy herein or omission herefrom which might otherwise arise is hereby expressly disclaimed. Accordingly, none of Danareksa Research Institute and/or its affiliated companies and/or their respective employees and/or agents shall be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement or omission in any information contained in this report. This report is prepared for general circulation. It does not have regard to the specific person who may receive this report.

Consumer Confidence Rebounds

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