Ardian Wibisono – Indonesia's economic blues may be one step closer to fading, at least if consumer sentiment is anything to go by.
Bank Indonesia's monthly consumer confidence survey crossed over into officially "optimistic" territory in April, notching a reading of 102.5, the highest figure since November 2007. Continuing a four-month rise, the index rose 3.9 points from the previous month, largely due to the reasonably calm legislative elections, Bank Indonesia said.
"The peaceful social and political situation after the elections was believed to improve people's expectations about economic conditions. This led to an optimistic consumer confidence index," Bank Indonesia said on its Web site on Tuesday.
BI's Consumer Confidence Index, a survey of 4,600 randomly selected households nationwide, began trending upward in January, after falling to a four-month low of 90.6 in December. A reading below 100 means that consumers are generally pessimistic about their economic future, with readings above that level suggesting overall optimism.
The survey also revealed good news on inflation worries, with fewer consumers expecting prices of goods to increase in the coming months. The survey's price expectation index for the next three months was down 2.8 points to 148.1; for six months, the figure was down 1.1 points to 152.6.
The respondents expected prices of food and tobacco to decrease in the next three to six months as the harvest season approaches and goods are more plentiful.
Eric Alexander Sugandi, an economist at Standard Chartered Bank, said consumer expectations were in line with government and central bank projections on inflation. "Inflationary pressure will continue to decline," he said, citing the effect of lower fuel prices.
Economists and Bank Indonesia are saying inflation should be about 5 percent by the year's end, with a significant drop in June.
Sugandi said a number of events in addition to elections contributed to rising confidence, including a salary increase for public servants.
"Confidence also improved because the global economic crisis seems to be having a limited effect on the domestic economy, or it may just be delayed," he said. "The index could return to pessimistic levels if there are major job cuts ahead showing that the crisis is starting to take hold."
Bank Indonesia acknowledged that the economy would continue to slow in the second quarter, largely due to lower trade figures because of the global economy, weak purchasing power and general uncertainty.
A BI survey of business conditions, also released on Tuesday, showed decreased economic activity in the first quarter. The results echoed a survey by the Central Bureau of Statistics saying business expectations in general were decreasing due to falling domestic and international demand.