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Indonesia's consumer growth story falters

Friday, May 8, 2015 - 06:33
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Indonesians are thinking twice before buying a car, a motorbike or even a pack of instant noodles. That's bad news for the country's huge consumer companies, and a dampener on an economy counting on household spending as other engines of growth sputter.

[JAKARTA] Indonesians are thinking twice before buying a car, a motorbike or even a pack of instant noodles. That's bad news for the country's huge consumer companies, and a dampener on an economy counting on household spending as other engines of growth sputter.

Indonesia's 10 biggest listed consumer companies reported first-quarter sales averaging 12.7 trillion rupiah (US$974 million), the lowest since January-to-March last year, according to Thomson Reuters data. The country's biggest car distributor PT Astra International Tbk was among the worst hit, with a 9 per cent slide in revenue from a year earlier. A fuel price hike in November and a weakening rupiah have eroded purchasing power in the country of 250 million people, said Adrianus Bias Prasuryo, senior analyst at Ciptadana Securities.

Consumer firms such as PT Indofood Sukses Makmur Tbk , one of the world's largest instant noodle makers, have also been hit by rising electricity and transport costs. Intense competition in Southeast Asia's biggest economy has made it difficult for businesses to raise prices to boost profits.

Indonesia's economy expanded at its weakest pace since 2009 in the first quarter. Annual growth in private consumption, which makes up more than half of gross domestic product, slowed to 5.01 per cent from 5.35 per cent a year earlier, data released on Tuesday shows. Analysts say the poor economic performance is a wake-up call for President Joko "Jokowi" Widodo. The former furniture businessman came to power six months ago with high hopes and a pledge to improve the country's decrepit infrastructure. But Mr Joko has been hamstrung by fissures within his own political party and discord between government agencies.

A consumer confidence index compiled by Indonesia's central bank slipped several notches to 107.4 in April from 116.9 in March, indicating consumers held back their purchases of durable goods due to slowing incomes and lower job availability.

"Indonesian confidence is clearly and significantly waning,"said Glenn Maguire, ANZ's chief economist for South Asia, ASEAN and Pacific. "The ongoing depreciation of the Indonesian rupiah, the fading of Jokowi's star, a disappointing amount of rate cuts from the central bank, and the failure of a domestic demand-led recovery to solidify all suggest that this downward phase in consumer confidence may still have some way to run."

REUTERS

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