Deni Ghifari, Jakarta – The central bank's consumer confidence index (CCI) showed a slight improvement last month, largely thanks to respondents having more positive expectations for the future, even as they saw current economic conditions deteriorating.
The CCI ticked up to 118.1 points in July from a reading of 117.8 the preceding month, according to the latest monthly survey from Bank Indonesia (BI) released on Friday.
The index has remained below 120 points since May, when it plunged to a multiyear low of 117.5 points.
In a press statement accompanying the survey results, BI spokesman Ramdan Denny Prakoso said the latest data "indicated" an improvement from June, mainly supported by rising consumer expectations.
The consumer expectations subindex, which reflects respondents' perception of the economy in the next six months, improved slightly, rising to 129.6 points for the month from 128.9 points in June.
The subindex is made up of three different indicators that reflect respondents' expectations for income, job availability and business activity.
Of the three, income expectations saw the largest improvement and job expectations rose a little, while expectations for business activity declined significantly.
Respondents in three of the four age groups surveyed expected their income to improve in the next six months, while respondents across all five income groups expected their earnings to improve.
On the other hand, the subindex on current economic conditions, covering current income, job availability and durable goods purchases, decreased slightly to 106.6 points in July from 106.7 points in June.
The latter two indicators both recorded an increase but current income showed a modest drop, as most income groups reported little to no improvement.
Overall durable goods purchases went up marginally, with a particularly high jump for the above 60 group of respondents.
Job availability also went up slightly but the gauge remained below the 100-point threshold between optimistic and pessimistic, where it has been since May.
Among the four different education groups surveyed, the most pessimistic were high school diploma holders, which have been consistently scoring below 100 points since May. Bachelor degree holders also dipped into pessimistic territory in June but maintained high optimism in terms of expectations.
Permata Bank chief economist Josua Pardede told The Jakarta Post on Friday that the survey showed overall spending power had been maintained while expectations for short-term economic prospects had strengthened, despite the weak perception on job availability.
"The implication is [that] if this optimistic trend persists, household spending could potentially become the main pillar of economic growth in the second half of 2025," Josua said.
"However, the challenge from employment and decline in savings ratio requires attention, given that both could affect the sustainability of consumption [levels] and household financial stability in the medium term," he added.
Respondents were also surveyed on their financial condition including their savings-to-income ratio, which declined to 13.7 percent in July from 14.1 percent in June.
Statistics Indonesia (BPS) announced on Aug. 5 that gross domestic product (GDP) grew 5.12 percent year-on-year (yoy) in the second quarter of 2025, beating the 4.8 percent market consensus.
Household spending, which accounts for the lion's share of GDP, was up 4.97 percent yoy in the second quarter, marginally higher than 4.95 percent logged in the first quarter of this year. The boost was partly due to a consumer stimulus package rolled out in the second quarter to increase spending during the school holiday, including discounted transportation fees.
In an analysis on Friday, SSI Research's macro strategy team wrote that "the divergence between forward-looking optimism and present-day [pessimism] suggests that while consumers expect conditions to improve, immediate pressures, such as higher living costs or slower wage growth, remain as constraints".
The team said the CCI would likely remain in positive territory in the second half due to a rebound in manufacturing activities, fiscal stimulus measures and a seasonal uptick in spending ahead of the year-end holidays.
The analysis also said a stable labor market and moderate inflation should further support the positive sentiment.
"That said, upside potential may be capped in the near term if currency volatility, global trade uncertainty or sluggish recovery in real wages persist," it said.
The SSI Research team opined that consumption would still be "the pillar of growth", given that the CCI was sitting "comfortably above" the 100-point threshold.
"As such, maintaining consumer [spending] power will be key to sustaining Indonesia's economic momentum, particularly amid shifting external demand conditions," the analysis concludes.
Source: https://asianews.network/consumer-confidence-inches-up-as-indonesians-see-better-times-ahead