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A survey of Indonesia’s central bank (Bank Indonesia) shows that retail sales have grown strongly in December 2018. The growth pace was recorded at 7.7 percent year-on-year (y/y) in the last month of 2018, strengthening from an annual growth rate of 3.4 percent (y/y) in the preceding month.
Agusman, Executive Director of Communication at Bank Indonesia, said the “growth of retail sales in Indonesia in December 2018 came on the back of rising sales of (1) food, beverages and tobacco, (2) cultural and recreational goods, (3) household equipment as well as (4) accessories and spare parts”.
Bhima Yudhistira, economist at Indef, commented on the data saying retail sales growth in December can be attributed to rising spending or consumption among Indonesia’s lower class. Ahead of the 2019 presidential and legislative elections they are supported by social assistance programs and donations (in return for their support) from those sides that participate in the elections. Therefore, consumption of food, drinks and cigarettes should remain strong in the coming months (the elections are scheduled for 17 April 2019).
However, the middle class and elite of the country remain somewhat concerned about the economy and therefore remain hesitant to spend. The may prefer to wait until after the elections before increasing spending.
The latest Bank Indonesia survey also indicates that retail sales will be strong in January 2019 (with its prediction set at a rate of 4.8 percent y/y). However, starting from March the growth rate is expected to ease. Still, there should occur a peak in May 2019 when retail sales are expected to increase amid heightened consumption related to the Idul Fitri celebrations.
Now we have the data of the last month of 2018, we can also determine the pace of retail sales growth in Indonesia for full-year 2018. In FY-2018 retail sales in Indonesia grew 3.7 percent (y/y), improving from a pace of 2.9 percent (y/y) in the preceding year. It is a positive sign for the economy because it implies household consumption is improving (on the back of strengthening purchasing power). And indeed, the nation gross domestic product (GDP) rose 5.17 percent (y/y) in 2018, the fastest annual pace since 2013, with household consumption growth accelerating to a rate of 5.05 percent (y/y), from 4.94 percent (y/y) in 2017. It also gives rise to optimism that the nation’s gross domestic growth (GDP) will continue to accelerate in 2019.