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Rosan Perkasa Roeslani, Chairman The Chamber of Commerce and Industry, is wary of the decline in public consumption in line with the 2018 political year.

He sees, entering the political year to welcome the 2019 general election, people are choosing to keep the funds. “But it is not healthy if it is too long,” he said at the Jakarta Convention Center on Wednesday, November 8, 2017.

Economic growth will work, as people also spend money on consumption. This case should be resolved by the government. Rosan saw the phenomenon of people choosing to save than this consumption will happen until people feel the economy has stabilized again.

To encourage people to shop, Rosan said he had proposed to the government to waive value added tax (VAT) to the public for a certain period of time. Efforts that, according to him can stimulate people to shop. “That policy needs to be looked at again, I’m sure people will spend a lot.

Rosan Perkasa Roeslani for Kadin - Image Courtesy marawa.id

Rosan Perkasa Roeslani for Kadin – Image Courtesy marawa.id

The Central Bureau of Statistics announced a slowdown in growth in household consumption levels in the third quarter of 2017. In that quarter, household consumption grew at 4.93 percent.

The Bank Indonesia Consumer Survey in October 2017 predicted consumers would tend to retain consumption and increase savings. This is in line with the weakening of consumer optimism on economic conditions.

Indicated from the decline in the ratio of consumption to total revenues, from 66.4 percent in September 2017, to 65.7 percent in October,” quoted from BI Consumer Survey October 2017.

The decline also occurred in the portion of income used for loan installments, from 14.4 percent to 14.1 percent. In contrast, the share of consumer saving to income increased 19.2 percent to 20.2 percent.

Consumer perceptions of current economic conditions weakened from the previous month. The October Economic Condition Index of 2017 was 107.6, down 2.7 points from September 2017.

This is caused by the decline of all components forming the index. The employment availability index decreased 5.8 points to 98.2 in October 2017. The decline occurred in all respondents’ level of education, the deepest being in S2 / S3 and SMA educated respondents.

Meanwhile, the index of consumer income fell 0.1 from the previous month to 114.5. The decrease in income mainly occurred in the group of respondents with the level of expenditure of Rp 1 million to Rp 3 million per month. [1]

In the past month, the public talked about the purchasing power of the Indonesian people who were mentioned somewhat weakened this year. The weakening of purchasing power is certainly a serious problem as this will significantly affect the Indonesian economy.

Discussions about the weakening of people’s purchasing power are based on many factors ranging from statistics to facts in the field.

Judging from the statistics, the growth rate of household consumption did show symptoms of slowing. Household consumption is considered the most appropriate indicator to measure people’s purchasing power.

Data from the Central Bureau of Statistics (BPS) showed that household consumption in the second quarter of 2017 grew 4.95 percent, slower than the second quarter of 2016 which grew 5.02 percent.

The slowdown in consumption growth occurs in all components, with significant declines occurring in non-food and beverage components.

Food and beverage consumption growth slowed from 5.26 percent in Q2 / 2016 to 5.24 percent in Q2 2017, while non-food and beverage components fell from 4.96 percent to 4.77 percent.

Based on the Consumption and Community Purchasing Power report as of August 2017, the Fiscal Policy Office of the Ministry of Finance also mentioned that there is a slowing growth in per capita consumption in upper middle income communities throughout 2017.

In the structure of Gross Domestic Product (GDP) of Indonesia, household consumption is the most dominant component with a portion of 55 percent. It is therefore not surprising that the slowdown in household consumption has finally pulled down Indonesia’s economic growth.

In the second quarter of 2017, Indonesia’s economic growth of 5.01 percent, slowed compared to the same period in the previous year which amounted to 5.06 percent.

The slowing growth in household consumption in the second quarter of 2016 is certainly below expectations. Household consumption is expected to grow above 5 percent to boost economic growth to 5.2 percent in 2017 as targeted by the government.


Where the customers go?

Decrease in purchasing power is not only visible on statistical figures, but also facts on the ground.

In recent months, many modern shopping centers are lonely visitors. In Glodok Market in West Jakarta for example, many kiosks are closed due to lower sales.

The legendary electronic shopping center is falling not only due to the decline in the level of public consumption but also the increasingly tight competition of modern shopping centers.

PT Matahari Department Store Tbk, a leading retailer in Indonesia will also close outlets in Pasaraya Manggarai and Pasaraya Blok M later this month. The reason is the same, in the two outlets, the retail sales of the Sun plummeted.

Photo Courtesy CNN Indonesia.

Photo Courtesy CNN Indonesia.

Nevertheless, many parties do not fully agree if it says the purchasing power of Indonesian people decline.

A number of parties said, data on household consumption appears to decline because there is now a shift in the pattern of conventional public spending to online systems or electronic commerce as massive development of the digital world.

Many electronic commerce transactions or also known as e-commerce that has not been recorded because the system has not been regulated strictly.

The rise of online shopping is illustrated from a number of facts. One of them is the surge in freight through the train, the mode that many courier service companies use to deliver goods.

Based on data from BPS, the number of goods sent by train during the first half of 2017 reached 39.99 million tons, jumped 18.32 percent compared to the number in the same period in 2016.


Business owners and customers are worried

In addition, there are also parties who argue, the decline in household consumption occurs because middle-income people upward tend to hold shopping.

This phenomenon occurs because people are worried about various government policies, especially about taxes and security issues.

Nielsen’s Executive Director of Service Unit Unit Yongky Surya Susilo said concerns about the tax authorities are related to the government’s plan to view credit card transactions. (Kompas Daily, 19/9/2017).

The decrease in consumption among the upper middle class is also due to the relatively low level of current demand for household electronic goods such as refrigerators, air conditioners, TVs, sound systems and kitchenware. Conditions that occur because the possibility of goods owned is complete and relatively not much damage.

Since the portion of spending is reduced, the automatic households have excess funds which they then deposit in the bank.

This is confirmed by the surge in public savings or third party funds (DPK) in banks in recent months.

Based on data from Indonesia Economic and Financial Statistics (SEKI) released by Bank Indonesia, the position of DPK in banks per July 2017 reached Rp 4.897 trillion, growing 9.5 percent compared to the position in July 2016 (year on year / yoy). The growth in depositor funds in July 2017 was faster than in July 2016, which was only 6.8 percent.

This signals that in the past year, there is a tendency for people to hold their purchases and at the same time increase their savings in banks.

If so can be said, people’s purchasing power is actually not decreased or weakened than before. The reason, people still have the funds, which is confirmed from their increased savings in banking.

Only, the funds they no longer spend for shopping as before. That is, people brake their consumption not because they have no money. [2]


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References Sources:

[1] Taken from 2018, Kadin Prediksi Orang Makin Malas Berbelanja written by Caesar Akbar, Dewi Rina Cahyani for TEMPO.

[2] Taken from Daya Beli Turun Atau Orang Malas Belanja? written by Muhammad Fajar Marta for Kompas.

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