INDONESIA: Confidence Signals Slower Q3 Consumption Growth & More Easing

Indonesian consumer confidence fell for a second straight month to 115.0 in September from 117.2, the lowest since April 2022. There were major protests at the end of August regarding economic pressures and generous housing subsidies for politicians, which were overturned. The respected finance minister Indrawati was also replaced and dissent restricted. The issues appear to be still weighing on sentiment.

• Private consumption growth been steady around 5% for around two years but the 1.8% q/q drop in Q3 average consumer confidence is signalling that it slowed last quarter. 

Indonesia private consumption

Source: MNI - Market News/LSEG

• Bank Indonesia surprisingly cut rates for the third consecutive month in September signalling that it has become more focussed on growth rather than the currency and so further easing on 22 October is possible given the softer consumption picture.
• BI's September statement added the phrase "joint efforts to stimulate economic growth", suggesting that it may be supporting government policy. It expects H2 2025 to improve due to the "strengthening policy synergy between Bank Indonesia and the Government".
• September consumer confidence was pressured by a 4 point drop in current incomes to 112.9 and 1 point in employment to 92.0. Thus it is unsurprising that durables purchases fell almost 2 points to 103.2. Expectations were 2 points lower to 127.2 driven by incomes and business but employment was slightly higher.