Retail sales in Indonesia increased ahead of the Idul Fitri holiday, hinting of a much-anticipated rebound in private consumption.
Shopping malls saw crowds of people hunting for discounts on new clothes, jewelry or the latest trends in shoes and handbags ahead of the annual festivity. Housewives have meanwhile been filling their grocery baskets with staples such as beef, chicken and chili, the prices of which have been uncharacteristically low for this time of the year.
“We expect retail sales to increase by between 20 percent and 25 percent, compared with the Idul Fitri holiday last year,” said Roy Mandey, chairman of the Indonesian Retailers Association (Aprindo).
Sales growth has been accelerating since January, reversing last year’s downward trend, and reached 3.4 percent in April – the highest in 10 months, according to World Bank data.
A Bank Indonesia survey also showed the Consumer Confidence Index increasing 2.9 points in May to 125.1 – near its three-year peak. A reading above 100 reflects optimism.
Consumers started spending more of their incomes, according to the survey. The average income-for-consumption ratio slightly increased to 66.1 percent from 66 percent the previous month, while the income-for-saving ratio declined to 19.6 percent from 20 percent.
According to Roy, retail sales during Ramadan and the Idul Fitri holiday will contribute around 40 percent to the full-year target. Last year, retail sales only contributed 6 percent to the total in the same period. The average contribution is 15 percent.
Indofood Sukses Makmur, one of Indonesia’s largest producers of packaged goods and flour, predicts a 10 percent to 12 percent increase in sales during this period.
“We increased stocks to meet rising demand during the fasting month and holidays that follow it,” Indofood director Taufik Wiraatmadja said on Thursday (07/06). He added that this was done to boost the company’s sales during Ramadan.
Indofood CBP Sukses Makmur, its subsidiary that produces various branded consumer products such as instant noodles, snacks and dairy products, predicts an 8 percent to 12 percent rise, while Bogasari, its flour producer arm, predicts a 10 percent increase in sales.
The growth in retail sales is also reflected in advertising spending during Ramadan, which increased 7 percent overall during Ramadan this year, compared with the same period last year.
Research by Nielsen shows that there was an average of 7 million TV viewers in Indonesia per day during this year’s Ramadan, which is 18.6 percent more compared with other months. People watched TV about five hours 19 minutes on average during Ramadan, compared with four hours and 53 minutes during the non-Ramadan period. The research compared the Ramadan period on May 16-21, with the non-Ramadan period of April 1-7.
“For online shopping during Ramadan, there is growth in clothing products, food and beverages products, household products and travel-related products,” said Hellen Katherina, executive director of media business at Nielsen Indonesia.
Signs of a Turnaround
Ramadan sales usually contribute 15 percent of Indonesian retailers’ annual sales, according to Roy of Aprindo. But last year’s sales were weak and only made up 6 percent of the full-year sales. As a result, retailers saw only 3.65 percent growth in 2017, representing the sector’s worst performance in the past 10 years.
The positive trend comes as a relief to retailers, who are now confident of reaching between 8 percent and 9 percent growth by the end of this year, Roy said.
He attributed the spike in retail sales to holiday bonuses and 13th checks received by some 4.3 million civil servants across the country.
This year, the government allocated Rp 35.76 trillion ($2.56 billion) towards 13th checks and holiday bonuses for civil servants who have not seen pay raises since 2016. Last year’s figure was Rp 23 trillion. The government has also raised its expenditure on social assistance, which includes village funds, cash transfers under the Family Hope Program (PKH) and rice social assistance (Rastra). It has spent Rp 17.9 trillion between January and March, almost a double last year’s figure.
“While a quarter that includes Ramadan usually fares better than other quarters, Jokowi’s move to increase the allowance for civil servants and expenditure on social programs proves to be a good decision to boost retail sales,” Alfred Nainggolan, a research analyst at brokerage firm Koneksi Kapital said on Sunday, referring to President Joko Widodo by his popular nickname.
“There will be more momentum to increase it, such as regional elections and the Asian Games, which in turn will further support Indonesia’s economic growth,” Alfred said. The regional elections will be held at the end of June, while the Asian Games will take place in August and September.
Stable food prices also contributed to consumer confidence, according to Juan Permata Adoe, deputy chairman of strategic foods affairs at the Indonesian Chamber of Commerce and Industry (Kadin).
The government opened the import market for staple goods and imposed price controls on rice, sugar, meat, packaged cooking oil, and fuel and power to stabilize prices.
A kilogram of beef sold for Rp 149,300 per kilogram during the last week of Ramadan, virtually unchanged from a month ago, according to National Strategic Food Price Information Center. In the past, it has not been unusual to see a 30 percent jump in commodity food prices during Ramadan and Idul Fitri.