Indonesia's Consumer Confidence Falls in July because of Rising Inflation
According to a Bank Indonesia report that was released on Monday (19/08), consumer confidence in Indonesia has weakened after the government decided to raise prices of subsidized fuels in June 2013. The country's consumer confidence index fell 8.7 points to 108¹ in July from 117 points in June. Higher fuel prices led to higher transportation costs that subsequently made many retailers increase prices of products, thus impacting on Indonesian households' purchasing power. In July, the annual inflation rate accelerated to 8.61 percent.
Attitudes towards Indonesia's economy have changed rapidly from positive to negative. Although it should not be forgotten that the country's economy is still growing at a relatively fast pace (around six percent), Indonesia is plagued by several issues that have caused foreigners to pull money out from Indonesia. This can be seen in falling stock indices and the weakening rupiah. Only one month ago, Nielsen Indonesia published that Indonesia's middle class was the world's most optimistic middle class segment in the second quarter of 2013. Many Asian countries were among the top ten of that Nielsen Global Survey of Consumer Confidence and Spending Intentions index. Now, however, the momentum has shifted back from emerging economies to the developed economies because the western world, particularly the United States, shows signs of continued economic recovery.
¹ A score above 100 points indicates consumers' optimistic view about the economy