Heightened Concerns on Prices

Transcription

1 M O N T H L Y R E P O R T 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 /1318/cc/2018 C O N S U M E R March 2018 Heightened Concerns on Prices Consumer Confidence weakened in February In this month, the Consumer Confidence Index (CCI) declined from to 97.3, its 1-year low. Our survey reveals that consumers gave less positive assessments on current economic conditions and that they are less optimistic toward the future. In particular, consumer concerns on high foodstuff prices increased in February. In addition, our latest survey also reveals that concerns over job scarcity have increased. The two main components which make up the CCI declined in February. The component measuring consumer sentiment toward current conditions, the Present Situations Index (PSI), retreated 8.6 percent to 76.7, as sentiment toward the current state of the economy and the job market deteriorated in February. As for the other main component of the CCI - the one measuring consumer sentiment toward the future (the Expectations Index or EI) it dipped 2.2 percent to The fall in this index reflects weaker consumer optimism toward the economy and the job market outlook over the next six months. With consumers less upbeat on the national economic outlook, buying intentions for durable goods also declined in February. 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 only percent of consumers expressed plans to purchase a durable good back in February 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 remained strong in the February survey. After edging down 2.5 percent in the previous survey, the Consumer Confidence in the Government Index (CCGI) stayed unchanged at in February. In our survey, three components of the CCGI increased while two components declined. Nonetheless, three 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 FEBRUARY 2018 RESULTS Consumer Confidence weakened in February In this month, the Consumer Confidence Index (CCI) declined from to 97.3, its 1-year low. Our survey reveals that consumers gave less positive assessments on current economic conditions and that they are less optimistic toward the future. In particular, consumer concerns on high foodstuff prices increased in February. In addition, our latest survey also reveals that concerns over job scarcity have increased. The two main components which make up the CCI declined in February. The component measuring consumer sentiment toward current conditions, the Present Situations Index (PSI), retreated 8.6 percent to 76.7, as sentiment toward the current state of the economy and the job market deteriorated in February. As for the other main component of the CCI - the one measuring consumer sentiment toward the future (the Expectations Index or EI) it dipped 2.2 percent to The fall in this index reflects weaker consumer optimism toward the economy and the job market outlook over the next six months. By region, consumer confidence weakened in four of the six regions covered by the survey. Sentiment deteriorated the most in West Java (where the index plunged 12.1 percent to 83.7 in February), followed by Jakarta (where the index edged down 6.4 percent to 116.8), East Java (where the index retreated 5.8 percent to 97.7), and Central Java (where the index slipped 3.0 percent to 103.7). By contrast, confidence still improved in South Sulawesi (where the index rose 0.5 percent to in February), and North Sumatra (where the index added 0.2 percent to 84.8). Consumer sentiment declined across different income bands. For the high-income consumers (incomes above Rp3,000,000 per month), the CCI dipped 6.2 percent from to in February, while for the low-income consumers (incomes below Rp1,500,000/month), the CCI retreated by 5.3 percent from 91.8 to Meanwhile, consumer confidence in rural and urban areas also declined. While the CCI for rural consumers posted a significant decline of 7.5 percent to 90.5 in February, the CCI for urban consumers declined less dramatically by 3.3 percent to Chart 1. Consumer Confidence Weakened in February 110 Consumer Confidence Index Fuel Prices Hike 100 Fuel Prices Hike Fuel Prices Hike 70 Basic Food Price Hike Fuel Prices 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 2

3 Chart 2. Rural Consumers were More Pessimistic in February 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: More Downbeat on the Economy Consumers gave more negative assessments on the current state of the national economy in our latest survey (this index retreated 5.8 percent from 85.6 to 80.6 in February). In our survey, the proportion of consumers who claimed that national economic conditions were good declined from 20.0 percent to 16.6 percent, while the proportion of consumers who claimed that national economic conditions were bad increased from 34.4 percent to 36.0 percent. Nevertheless, a significant proportion of consumers (47.4 percent) said that national economic conditions were normal. In regard to the current state of the local economy, consumers also gave more positive assessments (this index edged down 4.2 percent from to 98.8 in February). Consumers remained concerned by several key issues. Most notably, 78.2 percent of consumers still cited high foodstuff prices as a major factor weighing on the local economy in the last three months (up from 74.9 percent in January). Furthermore, 39.7 percent of consumers expressed concerns on job scarcity (up from 33.9 percent). In the February survey, consumers also gave more negative assessments on the current state of the job market (the index measuring sentiment toward job market conditions sank 19.6 percent to its lowest level in more than 2 years of 50.6). More specifically, more consumers claimed that jobs were hard to get (61.9 percent in February vs percent in January) while fewer consumers claimed that jobs were easy to get (12.5 percent in February vs percent in January). Some 25.4 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. 3

4 Table 2. Appraisal of Current Situations %Change Economic Conditions Local Area Economic Conditions Employment Conditions Chart 3. Key Concerns February 2018 Important factors that worsen local economic conditions in the past three months 3.4% 3.7% 4.2% Januari 2018 Important factors that worsen local economic conditions in the past three months 7.9% 7.8% 9.0% 39.7% 78.2% 33.9% 74.9% 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: Less Upbeat on the Economic Outlook Looking ahead over the next six months, consumers are also less optimistic: the Expectations Index (EI) edged down 2.2 percent to in February. Furthermore, all components of the EI declined. Nevertheless, in February 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 decline the most was the one measuring sentiment toward the local economic outlook. This component of the EI dipped 2.8 percent to in February. In more detail, our survey reveals that fewer consumers were upbeat on the local economic outlook (19.7 percent in February vs percent in January) while around 3.5 percent of consumers were still downbeat. Nevertheless, a large proportion of consumers (76.7 percent) still foresee no change in the local economic outlook over the next six months. As for the national economy, consumers are also less upbeat on its prospects: this index slipped 1.7 percent to in February. In regard to future family incomes, consumers are also less optimistic. This component of the EI slipped 2.4 percent to in February. In our survey, more consumers expect lower family incomes over the next six months (13.3 percent in February vs 10.7 percent in January) while the proportion of consumers who expect higher family incomes stayed around 23.5 percent. However, most consumers (63.2 percent) still don t expect any change in the outlook for future family incomes. The weaker optimism toward the prospects for family incomes is in-line with the expectation of a less conducive job market in the future (this index edged down 1.7 percent to 104.9). 4

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 Further With consumers less upbeat on the national economic outlook, buying intentions for durable goods also declined in February. 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 only percent of consumers expressed plans to purchase a durable good back in February Of the ten categories tracked by our survey, buying intentions declined in seven of them. Most notably, buying intentions for houses declined significantly from 1.45 percent in January to 0.70 percent in February. Also down significantly were buying intentions for automobiles (from 0.75 percent in January to 0.41 percent in February). At the same time, buying intentions for land and motorcycles declined moderately. Meanwhile, in the February survey, the percentage of people who want to buy gold & jewelry, audio-visual equipment, and home appliances decreased slightly. By contrast, buying intentions in four categories of goods still increased. Most notably, buying intentions for bicycles increased from 0.17 percent in January to 0.29 percent in February. Buying intentions for livestock increased moderately from 0.64 percent to 0.75 percent. Finally, the proportion of consumers who want to renovate their homes in the February survey also increased (up from 2.15 percent to 2.49 percent). Table 4. Buying intensions Oct-17 Nov-17 Dec-17 Jan-18 Feb-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 Increase In our latest survey, consumers said they expected inflationary pressures to increase slightly over the next six months. Overall, the index measuring consumer sentiment toward general prices added 1.8 percent from to in February Furthermore, this index is also higher than its level one year ago, when the index reached in February The expectation of higher prices over the next six months appears to reflect significant increases of price in the volatile component of foodstuff (such as chilli, garlic and onions). In regard to interest rates, fewer consumers foresee higher interest rates over the next six months (29.3 percent in February vs 31.9 percent in January) while more consumers foresee lower interest rates (5.2 percent in February vs 4.8 percent in January). Nevertheless, a significant proportion of consumers (24.3 percent) still expect interest rates to remain unchanged. As such, overall, the index measuring sentiment toward interest rates retreated 2.4 percent to in February. As for the rupiah, consumers in the main cities are more pessimistic on the outlook for the local currency. In our survey, the index measuring sentiment toward the rupiah slipped 0.1 percent to 73.3 in February. In regard to the outlook for stock prices, consumers are also less optimistic that Indonesian stocks will record gains over the next six months (this index retreated 4.1 percent to 109.8). Table 5. Expectations on Prices % Change General Prices Expectation Interest Rates Expectation Exchange Rates Expectation Stock Prices Expectation

7 Confidence in the Government: Still Strong Consumer confidence in the government s ability to carry out its duties remained strong in the February survey. After edging down 2.5 percent in the previous survey, the Consumer Confidence in the Government Index (CCGI) stayed unchanged at in February. In our survey, three components of the CCGI increased while two components declined. Nonetheless, three 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 February was the one measuring sentiment toward the government s ability to spur economic growth. The relevant index edged down 5.4 percent from to 99.3 in February. Also down was the component measuring sentiment toward the government s ability to stabilize prices. This index retreated 2.7 percent from 77.8 to 75.7, its lowest level in the last 1 year. By contrast, the component of the CCGI measuring sentiment toward the government s ability to enforce the rule of law still increased. This index edged up 4.5 percent from to in February, its highest level in more than 8 years. This is very encouraging since perceptions of weak law enforcement have dragged down consumer sentiment toward the government in the past. Consumers are also more convinced in the government s ability to ensure a safe and orderly environment. The relevant index added 2.3 percent from to in February. Meanwhile, the component measuring sentiment toward the government s ability to provide and maintain public infrastructure also increased in February. This index climbed 0.7 percent from to 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 7

8 TABLE 7. CCI - COMPOSITE SERIES CCI by Regions Jan-18 Feb-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 RespondentJan-18 Feb-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 8

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