The Consumer Confidence Index (CCI) continues to gain strength, ticking higher from 104.4 in May 2021 to 107.4 in June 2021 on the back of improving consumer perception of both the current and future economic conditions. This is the highest reading since the onset of the pandemic. At the same time, Indonesia has been battling its worst outbreak, as daily COVID-19 cases rise to a record high driven by the highly transmissible Delta variant.

consumer confidence index

source: Bank Indonesia

Our View

The strong showing in June’s CCI is in stark contrast to the situation on the ground as the public health crisis deepens in the country. Hospitals are overloaded and oxygen concentrators are in short supply, as the government imposes tighter restrictions to flatten the curve. Given how these restrictions concentrate mostly in Java and Bali islands, which account for nearly half of the overall consumer spending, we do not expect the optimism in CCI to translate to a substantial increase in consumer spending in the short-term, especially through offline channels. We expect Indonesia to record a 2.8% YOY growth in consumer spending in Q3. This growth is largely driven by base effects and will be insufficient to raise consumer spending levels above pre-COVID levels during this quarter.

Business Implications

Although CCI is a leading indicator that is commonly used as a proxy for consumer spending, B2C companies should be cautious when interpreting the index at face value amid uncertainties surrounding the local pandemic situation. In the short-term, companies should prioritize sales through online channels to sidestep the increased mobility and social restrictions. Looking ahead, marketing executives should consider creating brand awareness to capture demand once consumer spending eventually recovers in the long-term.

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