Indonesia’s Rising Retail Sales

Indonesian retail sales made their swiftest jump in seven months in January, indicating that private spending remains robust in Southeast Asia’s largest economy.

Retail revenue rose 28.4 percent in January, lead by sales of information and telecommunication equipment, a Bank Indonesia survey showed on Monday. The sales were expanded by 28.2 percent a month earlier.

“[The rise] indicates that private consumption continues to strengthen,” Bank Indonesia said in its report.

Private consumption accounts for 55 percent of the country’s economy. The central bank expects Indonesia’s $850-billion economy to grow by between 5.8 percent and 6 percent this year.

The revenue increase occurred across commodities, with sales of information and telecommunication equipment rising by 75 percent year on year.

“The rise was supported by various promotions and financing facilities that helped convince customers to purchase goods,” the central bank said.

Still, retailers expected sales to slow in February and March, before picking up again in April, when the country is scheduled to hold a legislative general election.

“Improving weather, which would expedite distribution, and the general elections are some factors that could encourage sales,” Bank Indonesia said.

The survey of 650 retailers in 10 major cities also projected sales would remain high in July as consumers nationwide prepare for Ramadan.

In a separate survey conducted last week, Bank Indonesia reported the lagging optimism of consumers in February as concerns bubbled over the upcoming presidential elections.

The Consumer Confidence Index fell slightly to 116.2 last month from 116.7 in January, central bank data showed. An index reading above 100 shows optimism, while a reading below 100 paints a pessimistic outlook.

Nevertheless, slowing inflation and a strengthening rupiah gave the indication that, despite electoral worries, Indonesia’s consumers remained satisfied with the
nation’s current economic condition.

Inflation fell to 7.8 percent in February, its lowest level in seven months, from 8.2 percent in a month earlier. The central bank expects inflation to settle between 3.5 to 5.5 percent this year.

The rupiah has strengthened by 6 percent so far this year, as foreign funds return to buy Indonesian stocks and bonds.