Arya News - Bank Indonesia’s retail sales index also dropped sharply in June, but the central bank sees improvements next month.
JAKARTA – Consumer sentiment has fallen for a third straight month as respondents to a central bank survey were less optimistic in July about economic conditions and their own financial situation, while retail sales remain subdued.
According to the monthly data released by Bank Indonesia (BI) on Monday, the consumer confidence index (CCI) fell from 117.8 points in June to 116.8 in July, its lowest level since September 2025.
The latest reading extended a downward trend seen since the CCI peaked at 127 points in January, interrupted only by a 0.1-point uptick in April following a boost from the Idul Fitri holiday spending.
The index remains well above the 100-point threshold and thereby signifies generally optimistic sentiment, while values below 100 points reflect public pessimism.
“Consumer confidence in July 2026 was supported by the current economic conditions index and the consumer expectations index, both of which remained in optimistic territory despite declining from the previous month,” BI spokesperson Ramdan Denny Prakoso said in a statement on the data release.
The current economic conditions subindex fell 1.3 points to 107.9, while the consumer expectations subindex slipped to 125.7 from 126.4 as job availability and business expectations remained under pressure.
Consumers also grew more cautious about buying durable goods, with the deterioration particularly sharp among households spending between Rp 3.1 million and Rp 4 million (US$174-$225) a month.
Their confidence fell 4.9 points to 112.2, while their durable-goods purchase index plunged 8.5 points to 96.2, moving below the 100-point threshold.
Retail sales of cars, however, a quintessential durable good, surged 23.1 percent year-on-year (yoy) in July, according to data from the Association of Indonesian Automotive Manufacturers (Gaikindo), extending strong growth reported in the preceding month.
The continued moderation in confidence posed a downside risk to household spending, which remained the main engine of economic growth in Indonesia, wrote Samuel Sekuritas Indonesia in a note.
“The drop in discretionary spending appetite suggests households are becoming more cautious amid pressure on purchasing power, while continued weakness in employment sentiment will further restrain consumption, particularly given worsening labor-market conditions,” said Samuel Sekuritas Indonesia research managing director Harry Su.
Private consumption grew 5.06 percent yoy in the second quarter while the country’s overall economic growth slowed to 5.29 percent from 5.61 percent in the first quarter.
The number layoffs reached 43,805 in January-July, according to Manpower Ministry’s data, adding to concerns over formal-sector employment and household income.
BI data also showed households becoming more cautious in managing their finances. The average share of income allocated to consumption fell to 72.7 percent in July from 73 percent, while the share devoted to debt service rose to 10.5 percent from 10 percent. The saving-to-income ratio also declined to 16.8 percent.
Separate data published by BI on Tuesday show the real sales index down 3 percent yoy in June, which marked a slight improvement from a 3.9 percent contraction in May and the smallest annual decline since April.
On a monthly basis, retail sales rose 0.7 percent in June, reversing a 1.5 percent decline in May, as demand held up during the school holiday period.
Sales of spare parts and accessories rose 18.8 percent yoy, while other household equipment increased 2.8 percent. Food, beverages and tobacco sales fell 3.6 percent, while clothing sales declined 3.1 percent.
BI expected retail sales to improve in July, forecasting 0.9 percent yoy growth to an index level of 224.4, preliminary data showed, driven by food, beverages and tobacco, as well as spare parts and other household equipment.
On a monthly basis, however, sales are projected to fall 0.3 percent as demand normalizes after the religious and school holiday periods, although the decline would be milder than the 4.1 percent monthly drop recorded in July 2025, according to the surveyed retailers.
Looking ahead, retailers expect price pressures to ease in September, with the central bank’s general price expectations index falling to 155.2 from 178.0 in August, before rising to 168.1 in December from 167.5 in November.
Weaker domestic demand could curb imports and support the rupiah by improving the external balance, but a sharper slowdown could hurt growth expectations and put pressure on capital inflows and the currency, according to Bank Danamon lead economist Faiz Irman.
“In this situation, rupiah movements are still far more dominated by external factors, especially the US dollar, US Treasury yields and global geopolitical risks, which also affect global oil prices,” Faiz told The Jakarta Post on Tuesday.
The central bank’s constraint at the moment “is not primarily domestic growth or inflation, but rupiah stability and the need to maintain the attractiveness of rupiah assets amid still-tight global conditions,” he added.
BI kept its benchmark interest rate unchanged at 5.75 percent in July after raising it by a cumulative 100 basis points (bps) over the previous two months to stem the rupiah’s slide, which accelerated after the Iran war in late February and pushed the currency to successive record lows.
The rupiah weakened to Rp 17,824 per US dollar on Tuesday after strengthening to Rp 17,795 on Monday, according to the Jakarta Interbank Spot Dollar Rate (JISDOR), as softer US inflation data weakened the dollar and contained domestic inflation and easing Middle East tensions earlier supported the currency.