Bank Indonesia reported the retail sales index in January are predicted to decline inline with seasonal patterns at the beginning of the year - Photo: Special

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) reported the retail sales index (RSI) in January are predicted to decline inline with seasonal patterns at the beginning of the year. This is reflected in the January’ index which is predicted to grow -3.1 percent year-on-year (YoY), from December 2019 which grew -0.5 percent.

The decline was mainly due to the sales of cultural and recreational goods, and clothing. The decline is in line with the consumption patterns of people who returned to normal after the celebration related to the national religious holidays.

But retail sales in the fourth quarter (4Q) of 2019 grew 1.5 percent (YoY), slightly higher than 1.4 percent in the previous quarter. The increase in growth was supported by sales of the food, beverage and tobacco group, other household equipment groups, and the spare parts and accessories group which remained high, said the central bank.

According to BI, pressure on rising prices at the retail level until June 2020 is expected to decline. This is reflected in the upcoming six-month General Price Expectation Index of 166.0, lower than 177.8 in the previous month. The decline in prices in June is predicted due to the return to normal prices after Ramadan and the Idul Fitri.

Earlier, the Bank reported Indonesia’ consumer confidence index (CCI) dropped to 121.7 in January from 126.4 in December 2019. Nevertheless, BI still confidence the consumer optimism occurs in all expenditure groups will improve in the future.

The weakening of consumer optimism, according to the policymaker, was caused by the decline in the index of current economic conditions by 3.5 points to 109.6 from the previous month and the index of expectations of economic conditions weakening 5.9 points to 133.7.

According to central bank, the CCI occurred in all categories of respondents’ expenditure and respondents’ age categories. Consumer perceptions weakened due to declining consumer confidence in the availability of employment today compared to six months ago. Moreover, consumer confidence in durable goods also contracted from 117.5 to 113.7 on electronic goods and household furniture.

Then, optimism about the availability of jobs was observed to be weak as indicated by the availability of employment in January which fell from 101.1 to 97.6. Consumers estimate that job availability in the future will not be as high as the previous month, reflected in the index of job availability expectations recorded at the level of 120.0, or down 7.1 compared to last month.

Along with the weakening of the other components of optimism, consumer confidence in current income declined 3.2 points from December at 117.5. Under these conditions, consumers expect consumption spending in the next three months to increase from the previous month, indicated by forecasts for household consumption through April which is expected to advance from 160.9 to 162.6.

Perceptions of current economic conditions and expectations of future economic conditions remain favorable underpin consumer optimism. Consumers view positively the current economic conditions, especially from the condition of income and purchases of durable goods.

In addition, consumers continue to have positive expectations regarding income, availability of employment, and business activities in the next six months. Consumers are forecasting an upward pressure on price increases in the next 12 months (January 2021).

This is indicated by the 12-month Price Expectation Index that will increase compared to the index in the previous month. The increase in price pressures is influenced by higher demand for the next year

On the supply side, economic growth is expected to be supported by the industrial sector which will increase between 5.0 – 5.5 percent. While the unemployment rate is expected to fall to 4.8 – 5.0 percent, accompanied by a reduction in the poverty rate in the range of 8.5 – 9.0 percent.

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