Indonesia's central bank indexes measuring consumer confidence and retail sales both dipped in June, pointing to ongoing weakness in household spending as a key pillar of the country's economy.
Central bank surveys indicate weakening consumer confidence and retail sales on the back of recent interest rate hikes, suggesting households may tighten their belts in the coming months.
The consumer confidence index (CCI) dipped to 117.8 points in June from 120.9 points in the preceding month, according to a monthly survey released by Bank Indonesia (BI) on Wednesday.
BI spokesperson Ramdan Denny Prakoso said in a press statement released together with the survey results that the CCI demonstrated that confidence “in economic conditions is maintained”.
The reading remained well above the 100-point threshold that separates optimism from pessimism but the indicator has been on a downward trend since the beginning of the year and is close to the multiyear low of 115 points registered in September last year.
The CCI peaked at 127 points in December and has since dropped from month to month save for a marginal uptick in April on account of the Idul Fitri spending boost, which this year fell in March.
The current economic conditions subindex, one of two subindexes that make up the CCI that is calculated by comparing respondents’ assessments of today’s conditions with those of six months ago, fell by three points from 112.3 in May to 109.2 points in June.
Views on job availability, current income and durable goods purchases, the three components that constitute the subindex, tumbled by up to 3.4 points.
Job market assessments were particularly bleak with a reading of 101.8 points, barely holding above the 100-point mark.
The component was below that threshold for five months last year starting in May, or a month after United States President Donald Trump threatened hefty import tariffs on countries including Indonesia, raising concerns across industries.
In recent months, the Iran war and rising energy prices fueled economic uncertainty.
While the durable goods purchases reading dropped 2.4 points, retail sales of cars, a quintessential durable good, surged 19.6 percent year-on-year (yoy) in June, according to the latest data from the Association of Indonesian Automotive Manufacturers (Gaikindo).
The consumer expectations subindex, which reflects respondents’ assessments of the economy in the next six months, dropped across all three components feeding into it: income expectations, job availability expectations and business expectations.
The business expectations component, recorded at 121.2 points, was the lowest since September 2022.
Meanwhile, the retail sales index (RSI) was projected to diminish in June to 221.6 points from 223.5 points a month prior, according to preliminary data BI released on Thursday, marking the weakest reading since October last year.
June’s figure reflects a 4.4 percent yoy drop as the surveyed retailers expected only two out of eight groups of goods to record positive annual sales, namely spare parts and accessories as well as other household equipment.
The respondents expected sales to improve in August and November, which BI attributed to Independence Day for the former and Christmas preparations for the latter. Inflationary pressure was expected to increase over the next three months and flatline over the next six.
The drop in both consumer confidence and retail sales comes after the monetary authority hiked the policy rate by 1 percentage point in three steps since May, causing an unusually fast increase in borrowing costs.
Samuel Sekuritas Indonesia’s macro strategy team wrote in an analysis on Wednesday that households would have to adjust to higher borrowing costs over the coming months, which created “modest pressure” on consumer confidence.
“Although higher rates have helped macroeconomic stability and provided some support [for rupiah], tighter financials will weigh on household borrowing and discretionary spending. The decline in confidence toward durable goods purchases reflects consumers’ increasing caution on big-ticket expenditures as financing costs rise,” they wrote.
The team noted that consumption in the second half would moderate on the back of financial market volatility, continued fiscal and trade deficits as well as a potential sovereign rating downgrade.
“The latest decline signals cautious household sentiment amid rising inflation, tighter conditions and a weakening labor market,” wrote the research team.
They went on to say that the deteriorating confidence was consistent with other macroeconomic indicators that point to “softer domestic demand, for instance the manufacturing purchasing managers’ index (PMI), which fell into contraction territory in June, as well as the trade balance that recorded a deficit in May.
Source: Asianews
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<p>Time: November 2025<br /> By: WTO and International Trade Group, Legal Department – VCCI</p>
