Consumer Confidence Rebounds

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 /1321/cc/2018 C O N S U M E R April 2018 Consumer Confidence Rebounds Consumer Confidence strengthened in March 2018. In this month, the Consumer Confidence Index (CCI) increased from a 1-year low of 97.3 to 100.8. Our survey reveals that consumers gave more positive assessments on current economic conditions and the current job market. They are also more optimistic toward the future. In particular, consumer concerns on high foodstuff prices have fallen to 74.4% in March from 78.2% in the previous month. The two main components which make up the CCI increased in March. The component measuring consumer sentiment toward current conditions, the Present Situations Index (PSI), added 7.4 percent to 82.3, as sentiment toward the current state of the economy and the job market improved. As for the other main component of the CCI - the one measuring consumer sentiment toward the future (the Expectations Index or EI) it rose 1.6 percent to 114.6. The increase in this index reflects stronger consumer optimism toward the economy and the job market outlook over the next six months. With consumers more upbeat on the national economic outlook, buying intentions for durable goods also increased in March. In our survey, 42.75 percent of consumers expressed plans to purchase a durable good over the next six months, or up from 41.36 percent in the previous month. Furthermore, on a yearly comparison, buying intentions for durable goods are also higher since only 32.42 percent of consumers expressed plans to purchase a durable good back in March 2017. ASTI SUWARNI Analyst (62-21) 29555777/ 888 ext 3608 asti@danareksa.com MARTIN JENKINS Analyst (62-21) 29555777/ 888 ext 3609 martin@danareksa.com Consumer confidence in the government s ability to carry out its duties remained strong in the March survey. After staying at 103.5 in the previous survey, the Consumer Confidence in the Government Index (CCGI) rose 4% to 103.5 in March. In our survey, three components of the CCGI increased while two components declined. Furthermore, 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. www.danareksa-research.com

THE MARCH 2018 RESULTS Consumer Confidence strengthened in March 2018. In this month, the Consumer Confidence Index (CCI) increased from a 1-year low of 97.3 to 100.8. Our survey reveals that consumers gave more positive assessments on current economic conditions and the current job market. They are also more optimistic toward the future. In particular, consumer concerns on high foodstuff prices have fallen to 74.4% in March from 78.2% in the previous month. The two main components which make up the CCI increased in March. The component measuring consumer sentiment toward current conditions, the Present Situations Index (PSI), added 7.4 percent to 82.3, as sentiment toward the current state of the economy and the job market improved. As for the other main component of the CCI - the one measuring consumer sentiment toward the future (the Expectations Index or EI) it rose 1.6 percent to 114.6. The increase in this index reflects stronger consumer optimism toward the economy and the job market outlook over the next six months. By region, consumer confidence improved in five of the six regions covered by the survey. Sentiment improved the most in East Java (where the index added 6.9 percent to 104.5 in March), followed by Central Java (where the index rose 6.3 percent to 110.1), West Java (where the index climbed 4.3 percent to 87.3), Jakarta (where the index increased 3.8 percent to 121.2), and North Sumatra (where the index rose 1.8 percent to 86.3). By contrast, confidence still deteriorated in South Sulawesi (where the index slipped 1.7 percent to 101.7 in March). Consumer sentiment increased across different income bands. For the high-income consumers (incomes above Rp3,000,000 per month), the CCI rose 4.8 percent to 111.1 in March, while for the low-income consumers (incomes below Rp1,500,000/month), the CCI rose less dramatically by only 1.4 percent to 88.1. Meanwhile, consumer confidence in rural and urban areas also increased. While the CCI for rural consumers posted a significant increase of 8.4 percent to 98.0 in March, the CCI for urban consumers increased less dramatically by 1.9 percent to 102.0. Chart 1. Consumer Confidence Strengthened in March 110 Consumer Confidence Index 100 90 80 70 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 2

Chart 2. Rural Consumers Were Much More Upbeat in March 110 Urban Areas Rural Areas 100 90 80 70 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 103.0 101.8 101.8 97.3 100.8 3.6 Present Situation 83.6 84.5 83.9 76.7 82.3 7.4 Expectation 117.6 114.8 115.2 112.7 114.6 1.6 Appraisals of Current Situations: More Upbeat on the Local Economy Consumers gave more positive assessments on the current state of the national economy in our latest survey (this index added 6.8 percent from 80.6 to 86.1 in March). In our survey, the proportion of consumers who claimed that national economic conditions were good increased from 16.6 percent to 19.5 percent, while the proportion of consumers who claimed that national economic conditions were bad declined from 36.0 percent to 33.4 percent. Nevertheless, a significant proportion of consumers (47.1 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 up 1.6 percent from 98.8 to 100.4 in March). Nevertheless, consumers remained concerned by several key issues. Most notably, 74.4 percent of consumers still cited high foodstuff prices as a major factor weighing on the local economy in the last three months (albeit down from 78.2 percent in February). Furthermore, 40.2 percent of consumers expressed concerns on job scarcity (up from 39.7 percent). In the March survey, consumers also gave more positive assessments on the current state of the job market (the index measuring sentiment toward job market conditions jumped 19.6 percent from its lowest level in more than 2 years of 50.6 to 60.6 in March). More specifically, fewer consumers claimed that jobs were hard to get (56.7 percent in March vs. 61.9 percent in February) while more consumers claimed that jobs were easy to get (17.3 percent in March vs. 12.5 percent in February). Some 26.0 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

Table 2. Appraisal of Current Situations %Change Economic Conditions 91.1 90.0 85.6 80.6 86.1 6.8 Local Area Economic Conditions 103.4 100.6 103.1 98.8 100.4 1.6 Employment Conditions 56.3 62.9 63.0 50.6 60.6 19.6 Chart 3. Key Concerns February 2018 Important factors that worsen local economic conditions in the past three months March 2018 Important factors that worsen local economic conditions in the past three months 3.4% 3.7% 4.2% 5.3% 6.2% 7.3% 39.7% 78.2% 40.2% 74.4% 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 Economic Outlook Looking ahead over the next six months, consumers are also more optimistic: the Expectations Index (EI) edged up 1.6 percent to 114.6 in March. Furthermore, all components of the EI increased in March 2018 and 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 the national economic outlook. This component of the EI added 2.4 percent to 122.7 in March. In more detail, our survey reveals that more consumers were upbeat on the local economic outlook (27.4 percent in March vs. 24.8 percent in February) while around 4.8 percent of consumers were still downbeat. Nevertheless, a large proportion of consumers (67.6 percent) still foresee no change in the local economic outlook over the next six months. As for the national economy, consumers are also more upbeat on its prospects: this index added 2.1 percent to 118.6 in March. In regard to future family incomes, consumers are also more optimistic. This component of the EI climbed 0.4 percent to 110.6 in March. In our survey, fewer consumers expect lower family incomes over the next six months (12.8 percent in March vs 13.3 percent in February) while the proportion of consumers who expect higher family incomes stayed at around 23.4 percent. However, most consumers (63.5 percent) still don t expect any change in the outlook for future family incomes. The stronger optimism toward the prospects for family incomes is in-line with the expectation of a more conducive job market in the future (this index edged up 1.4 percent to 106.3). 4

Table 3. Expectations in the Six Months Ahead % Change Economic Prospects 126.6 122.5 121.9 119.8 122.7 2.4 Local Area Economic Prospects 122.7 119.0 119.5 116.1 118.6 2.1 Employment Prospects 107.7 106.4 106.7 104.9 106.3 1.4 Family Income Prospects 113.5 111.4 112.9 110.2 110.6 0.4 Purchasing Intentions for Durable Goods: Strengthened With consumers more upbeat on the national economic outlook, buying intentions for durable goods also increased in March. In our survey, 42.75 percent of consumers expressed plans to purchase a durable good over the next six months, or up from 41.36 percent in the previous month. Furthermore, on a yearly comparison, buying intentions for durable goods are also higher since only 32.42 percent of consumers expressed plans to purchase a durable good back in March 2017. Of the ten categories tracked by our survey, however, buying intentions increased in only two of them. In March 2018, buying intentions for houses increased from 0.70 percent in February to 0.75 percent in March. Also up were buying intentions for home appliances (from 7.37 percent in February to 7.54 percent in March). At the same time, buying intentions for motorcycles stayed unchanged in March. By contrast, buying intentions in seven categories of goods still declined. Most notably, buying intentions for automobiles declined significantly from 0.41 percent in February to 0.17 percent in March. Buying intentions for land also declined significantly from 0.29 percent to 0.12 percent. Meanwhile, buying intentions for livestock and bicycles declined moderately. At the same time, buying intentions for gold & jewelry declined slightly in March. Finally, the proportion of consumers who want to renovate their homes in the March survey also decreased (down from 2.49 percent to 2.38 percent). Table 4. Buying intensions Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Automobile 0.46 0.58 0.75 0.41 0.17 Motorcycle 2.55 2.84 2.67 1.91 1.91 Bicycle 0.41 0.12 0.17 0.29 0.23 House 0.75 0.46 1.45 0.70 0.75 House Renovation 3.07 2.96 2.15 2.49 2.38 Land 0.41 0.35 0.46 0.29 0.12 Audio-visual 4.81 4.64 4.76 4.70 3.89 Home appliance 8.24 7.66 7.83 7.37 7.54 Gold & jewelry 2.03 1.86 1.22 1.16 1.10 Livestock 0.35 1.33 0.64 0.75 0.52 5

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 fell 1.6 percent from 188.6 to 185.6 in March. However, this index is still higher than its level one year ago, when the index reached 184.1 in March 2017. In part, at least, the expectation of lower prices over the next six months might be attributable to expectations that foodstuff prices will fall due to greater supply of foodstuffs in relation to the harvesting season in March. In regard to interest rates, more consumers foresee lower interest rates over the next six months (7.7 percent in March vs 5.2 percent in February) while around 30.1 percent of consumers still foresee higher interest rates. Nevertheless, a significant proportion of consumers (25.7 percent) still expect interest rates to remain unchanged. As such, overall, the index measuring sentiment toward interest rates fell 1.4 percent to 122.3 in March. 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 retreated 3.0 percent to 71.1 in March. In regard to the outlook for stock prices, however, consumers are more optimistic that Indonesian stocks will record gains over the next six months (this index climbed 0.8 percent to 110.7). Table 5. Expectations on Prices % Change General Prices Expectation 183.2 186.8 185.3 188.6 185.6-1.6 Interest Rates Expectation 127.6 128.7 127.1 124.0 122.3-1.4 Exchange Rates Expectation 83.6 70.5 73.2 73.3 71.1-3.0 Stock Prices Expectation 107.8 110.7 114.5 109.8 110.7 0.8 6

Confidence in the Government: Strengthened Consumer confidence in the government s ability to carry out its duties remained strong in the March survey. After staying at 103.5 in the previous survey, the Consumer Confidence in the Government Index (CCGI) rose 4% to 107.6 in March. In our survey, three components of the CCGI increased while two components declined. Furthermore, 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 increase the most in March was the one measuring sentiment toward the government s ability to stabilize prices. This index jumped 17.4 percent from its lowest level in the last one year of 75.7 to 88.8. Indeed, our survey reveals that fewer consumers now cited high foodstuff prices as a major factor weighing on the local economy in the last three months (74.4 percent in March vs. 78.2 percent in February). Also up was the component of the CCGI measuring sentiment toward the government s ability to spur economic growth. The relevant index edged up 5.4 percent from 99.3 to 108.8 in March. At the same time, the component measuring sentiment toward the government s ability to provide and maintain public infrastructure also increased in March. This index edged up 0.5 percent from 119.4 to 120.0. By contrast, the component of the CCGI measuring sentiment toward the government s ability to enforce the rule of law still declined. This index edged down 0.8 percent from its highest level in more than 8 years of 108.0 to 107.1 in March. Please note that perceptions of weak law enforcement have dragged down consumer sentiment toward the government in the past. Consumers are also less convinced in the government s ability to ensure a safe and orderly environment. The relevant index retreated 1.4 percent from 114.9 to 113.4 in March. Table 6. Confidence Toward The Current Government %Change Recovery National Economy 107.8 104.8 105.0 99.3 108.8 9.5 Stabilize the Price of Goods 93.3 84.2 77.8 75.7 88.8 17.4 Provide and maintain public infrastructure 118.8 121.7 118.6 119.4 120.0 0.5 Ensure a safe and orderly environment 113.2 115.1 112.4 114.9 113.4-1.4 Enforce the rule of law 99.3 104.5 103.3 108.0 107.1-0.8 CCGI 106.5 106.1 103.4 103.5 107.6 4.0 * Note: Starting in April 2007, the Consumer Confidence in the Government Index (CCGI) has been adjusted to the year of 2003 = 100 7

TABLE 7. CCI - COMPOSITE SERIES CCI by Regions Feb-18 Mar-18 MoM %Change National Consumer Confidence Index 97.3 100.8 3.6 Present Situation 76.7 82.3 7.4 Expectations 112.7 114.6 1.6 Jakarta Consumer Confidence Index 116.8 121.2 3.8 Present Situation 90.5 97.4 7.6 Expectations 136.5 139.1 1.9 West Java Consumer Confidence Index 83.7 87.3 4.3 Present Situation 51.8 53.0 2.2 Expectations 107.7 113.1 5.0 Central Java Consumer Confidence Index 103.7 110.2 6.3 Present Situation 87.8 97.0 10.5 Expectations 115.5 120.1 4.0 East Java Consumer Confidence Index 97.7 104.5 6.9 Present Situation 87.9 99.0 12.6 Expectations 105.0 108.6 3.4 North Sumatera Consumer Confidence Index 84.8 86.3 1.8 Present Situation 56.9 61.0 7.1 Expectations 105.7 105.3-0.4 South Sulawesi Consumer Confidence Index 103.5 101.7-1.7 Present Situation 89.8 91.7 2.1 Expectations 113.8 109.3-4.0 TABLE 8: NATIONAL FIGURES CCI by Classification RespondentFeb-18 Mar-18 MoM Profile (%) %Change Age of Respondents 20-29 16.2 105.1 104.6-0.5 30-39 28.2 100.0 104.6 4.6 40-49 28.8 96.2 99.7 3.7 50-59 19.4 93.4 97.4 4.3 60 and over 7.4 86.0 90.4 5.1 Educational Level Primary School or less 33.6 88.9 92.6 4.1 High School 59.1 99.5 103.5 4.0 Academy/University 7.3 111.4 116.4 4.5 Households Income under RP 1.500.000,- 10.7 86.9 88.1 1.4 Rp 1.500.001-3.000.000 58 94.4 97.5 3.3 Rp 3.000.001,- and over 31.3 106.0 111.1 4.8 Type Area Urban 68.6 100.1 102.0 1.9 Rural 31.4 90.5 98.0 8.4 Gender Male 50.0 98.0 100.0 2.0 Female 50.0 96.6 101.5 5.1 Occupation Worker 29.8 100.2 100.6 0.4 Self employed 35.6 95.0 102.5 7.9 Unemployed 34.5 96.8 99.1 2.3 * An index reading above 100 indicates that positives responses outnumber negative responses 8

RESEARCH TEAM Damhuri Nasution Kahlil Rowter Head of Economic Research Chief Economist damhuri@danareksa.com kahlil.rowter@danareksa.com Asti Suwarni Analyst asti@danareksa.com 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, 10110 INDONESIA Tel : (62-21) 29555777 / 888 (hunting) Fax : (62 21) 3501709 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.