Visitors at a shopping center in Jakarta on Saturday, June 10. A number of stores are offering discounts to attract the interest of shoppers.
JAKARTA, KOMPAS – Household consumption, as the main driver of national economic growth with a contribution of 56.94 percent, has remained stagnant, mainly as a result of the decline in the income of the people, especially the lower middle class.
Jasua Pardede, an economist at PT Bank Permata Tbk, told Kompas in Jakarta on Friday that the stagnation of the household consumption indicated a decline in the consumer confidence index in June 2017.
The decline in the index occurred because the consumers expected there would be a decline in job opportunities within the next six months. In addition, the percentage of the people’s income spent on spending or consumption also declined from December 2016 to June 2017, while the portion of revenues used for savings tended to increase.
"This occurred due to the decline in average wages of laborers and construction workers by 0.07 percent and 1.91 percent annually in June 2017," he said.
The decline in household consumption was also reflected in retail sales volume in June 2017. The Central Statistics Agency (BPS) said the average import price rose 1 percent as of June 2017 with trading volume down 1 percent during the first semester of this year.
"In addition, another indication of the stagnation of the household consumption was the low growth of the retail sales volume and fast-moving consumer goods. It happened because people tended to save money and delay consumption," he said.
Separately, assistant to Bank Indonesia (BI) governor and the head of the central bank’s department of economic and monetary policy, Dody Budi Waluyo, said that household consumption in the first semester of 2017 slowed down. The lower growth was reflected, among others, in retail sales in June 2017, which only grew 6.7 to 6.8 percent, or 7 to 8 percent lower than the figure recorded in June.
The decline in household consumption was also due to the decline in the people’s purchasing power as a result of the increase in electricity rates. The disbursement of the 13th salary of the employees was also delayed from June to July this year.
"The slowing growth in household consumption was beyond BI\'s expectations. But BI remains optimistic in the second semester of this year that household consumption will grow," he said.
According to Dody, BI and the government will further encourage the increase in the household consumption by keeping inflation at a low level. "In the future, the government will still provide social assistance to poor people. The government’s infrastructure projects are also continuing so it is expected to result in an increase in household consumption," he said.
Shifting patterns
The chairman of the Association of Indonesian Food and Beverage Entrepreneurs (Gapmmi), Adhi S. Lukman, said he hoped that the decline in purchasing power could be immediately addressed.
He mentioned that on July 13, there was a discussion of a focused group that included food and beverage associations, retail associations, banks, association of truck owners and Nielsen. According to discussions and surveys, there was a shift in shopping patterns. The lower middle class people who usually shopped before the Ramadhan fasting month shifted their spending during the Idul Fitri holiday. This indicated a limitation of savings, with spending having relied more on the Idul Fitri allowance.
The upper middle class had also begun to limit purchases of expensive goods, such as property or cars, because of concerns about the change of the tax rules.
The chairman of the Indonesian Chamber of Commerce and Industry (Kadin), Rosan Perkasa Roeslani, said the decline in the purchasing power and consumption had been felt in many sectors. "It\'s not because there\'s no money, but it\'s more of a psychological factor," he said.
In response to these conditions, Kadin will listen to suggestions from businesspeople and work together with the government to stimulate the economy.
