Consumer confidence drops on fuel-price hikes

JAKARTA. Consumer confidence slipped after the government raised the prices of subsidized fuels last month in a move that could spike consumer prices and hurt purchasing power, according to two separate surveys.

The ANZ-Roy Morgan Indonesian Consumer Confidence survey shows a drop in consumer confidence by 9.4 points to 152 in December last year from November, the steepest drop since 2012. Few respondents said they were financially better off compared to the previous year.

“The combination of fuel-and food-price increases, depreciation of the rupiah as well as seasonal slowdown have created a confidence slump of confidence, the most significant since August last year,” said Glenn Maguire, chief economist of ANZ South Asia, ASEAN and Pacific.

In December, more respondents said their family’s financial conditions were “worse” compared to a year ago, while fewer respondents believed their families were better off financially.

But confidence is predicted to rise in January as the price of the widely used Premium gasoline was lowered to Rp 7,600 (60 US cents) a liter earlier this month after being raised to Rp 8,500 per liter in November from Rp 6,500 a liter previously, according to Maguire.

Consumers’ perception of the nation’s overall economic conditions remained positive as they understood the government’s reasons behind raising fuel prices, according to the survey. The government’s new fuel-subsidy scheme allows billions of US dollars in the state budget to be allocated for more productive use such as infrastructure development.

A similar survey conducted by Bank Indonesia (BI) showed that consumer confidence weakened slightly following the fuel-price increases.

The central bank’s survey — based on sampling from 4,600 households in 18 major cities in Indonesia — showed that the consumer confidence index fell by 3.6 points to 116.5 in December compared with November.

The decline was better when compared with the previous fuel-price hikes in June 2013, according to the survey.

The BI survey also said consumers were expecting price pressures early this year, but expected the pressures to subside in March.

BI deputy governor Halim Alamsyah said the central bank expected any inflationary pressure from the government’s fuel-price hikes to die down within three months.

The consumer price index (CPI), or inflation rate, would also decrease to the central bank’s target range of between 3.5 percent and 5.5 percent by the end of this year in spite of the rate reaching 8.36 percent in December last year on a year-on-year basis, according to him.

“We are continuously monitoring the progress of inflation with the government so as to prevent price pressures from disturbing market confidence,” Halim said. (Grace D. Amianti)