World Economy

Indonesia Household Consumption Falls

The Jakarta Consumer Goods Index  is down 14% this year.The Jakarta Consumer Goods Index  is down 14% this year.

Household consumption, the engine of Indonesia’s trillion-dollar economy, is purring again.

The best quarterly gain in private spending in four years should get a further fillip from the millions of dollars likely to be spent on Asian Games this month and the International Monetary Fund annual gathering in October and the long-drawn presidential and parliamentary election campaigns, according to PT Bank Mandiri, Bloomberg reported.

The return of spending power should be a catalyst for Indonesian consumer stocks, among the worst performers this year, as household consumption accounts for about 55% of Southeast Asia’s largest economy.

A sustained recovery in private investment and increased public spending on infrastructure may keep the growth momentum going, according to Nomura Holdings Inc.

Consumption expanded 5.14% last quarter, breaking the 5% threshold for the first time in seven quarters after President Joko Widodo introduced several measures to preserve purchasing power, including freezing retail fuel and electricity prices ahead of April elections. The pickup in consumption is positive for equities, especially the consumer staple stocks, said Jemmy Paul, president director of PT Sucorinvest Asset Management.

The Jakarta Consumer Goods Index is down 14% this year, making it the worst performer among nine industry groups in Jakarta Composite Index, as PT Unilever Indonesia and PT Hanjaya Mandala Sampoerna retreated on outlook for weak earnings.

“The good GDP reading somehow has not been reflected in the financial performance of a number of companies in the first half of 2018,” said Maynard Arif, head of research at DBS Vickers Securities Indonesia. “Some investors might prefer to wait to see if the positive trend will continue for the rest of the year.”

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