Confidence Down Again

7 11 2007

The Consumer Confidence Index (CCI), which had declined by 1.9% in September, fell further in October, losing 0.9% to a fourmonth low of 82.2. Weaker job growth coupled with concerns over the economy continue to worry consumers and make them anxious in regard to future developments. As such, both components of the CCI saw falls. The Present Situations Index (PSI) dropped the most, down by 2.0% to 62.5, while the Expectations Index (EI) edged down 0.3% to 97.0.

Unlike in September, when declines in confidence were due to transitory factors such as the seasonal surge in prices due to the Idul Fitri celebrations, October’s decline in confidence was mostly driven by concerns over weaker job growth. More over, rising prices and kerosene fuel shortages in some parts of the country have also dampened confidence, especially of people living in urban areas.

Buying intentions weakened further in October. Consumers fear that with tougher times ahead they will see no appreciable improvement in their incomes. And if salaries are not hiked by more than the rate of inflation in the near future, then purchasing power is unlikely to pick up. As such, the proportion of consumers planning to buy durable goods over the next six months slipped from 26.2% to 25.4%, its lowest level since April 2007.

With concerns over unemployment and the kerosene fuel shortages, the index measuring consumer confidence in the government (CCGI) dipped 2.8% to 97.3 in October. In particular, consumers had less confidence in the government’s ability to bring about brisker economic growth. And, at the same time, consumers still had doubts in the government’s ability to stabilize

the price of goods (this component of the CCGI fell 2.3% to 71.6, which is only 0.2% higher than its historic low of 71.4 in May 2007).