Consumer Confidence
Indonesia
the biggest archipelagic state in the world is recently famous for its stable
high GDP growth rate, many experts
believe that domestic consumption
was the cause of Indonesia's
economy to survive and grow in the midst of the crisis that hit the developed countries in the world. In our country,
consumption accounted for more than
50% of GDP and
that is why consumption has a vital role in our
country’s economy.
Consumer Confidence is
an economic indicator which measures the degree of optimism that consumers feel
about the overall state of the economy and their personal financial situation.
How confident people feel about stability of their incomes determines their
spending activity and therefore serves as one of the key indicators for the overall
shape of the economy.
Consumer's
Confidence is measured by the Consumer Confidence
Index, which, in
Indonesia, is tabulated by Bank Indonesia as
the average yield between Current Economic Condition Index (CECI) and
Consumer Expectation Index (CEI) in 18 big cities . CECI
is an index
that shows how consumers’
perceptions of economic conditions in their country at present time, how much confidence
they have against the country, as
measured by several factors
such as household income, right time to
buy durable goods
and the unemployment rate. Meanwhile,
the CEI is an index that measures the consumers’ average confidence about
future prospects of several factors, such as : their expectation of future
income, future jobs availability, and future general condition of their
country.
Indonesia’s Consumer Confidence is on a rising
trend, this is in line with our country’s high GDP growth and good
macro-economics indicators, even according to Nielsen, Indonesia in Q2, took
India’s position as the country with the most confidence consumers in the
world.
Although consumer confidence appears
to be related to a number of economics variables, there may also be others
factors affecting the confidence survey balances that provide important
incremental information on consumers’ views. The unexplained component may
reflect how consumer confidence reacts to non-economics factors. Some good
example of this was happened in the USA, It’s consumer confidence index in
September 2001 was dropped to 97,6 from 114,0 in the month before. The same
condition happened in Indonesia when the Bomb Bali I exploded on October 2002,
Indonesia’s consumer confidence also plunged from 78,5 to below 60. Although
the effect of these non-economic factors is huge, the economic factors still
gives a more frequent impact on the consumer confidence, the graphs above shows
how economic policies and conditions affects Indonesia’s consumer confidence,
the policy of increasing the tariff of electricity and fuel subsidy reduction,
degrade the confidence of our country’s consumers.
So what can we get by knowing this
number? We can treat CCI as another macroeconomics indicator, since it really
has a correlation with other macroeconomics data, such as inflation,
unemployment rate, prices, even the GDP itself. CCI is also included as one of
the most important factors of consumers spending, which the latter is an
integral part for counting a country’s GDP. So, CCI can be used as a sign of
the condition of a country at the present time, and the potential growth in the
future. That is why some investors did use this index as a tool to choose in
which country they are going to “inject” FDI.
From the latest Nielsen Global
Consumer Confidence Report (Q3), Indonesia and India together topped both the
regional (Asia-Pacific) and world ranking, and with the average score of 92,
and only 12 out of 58 countries surveyed shows a score over 100, it can be
concluded that the average person in this world still pessimistic about their
financial position, and their countries’ general economic condition in the
future. In the picture below, we can see all the 58 surveyed countries, and the
change in the confidence from the Q2, and also fluctuations of consumer
confidence of some selected countries.
The
first Graphs above tells us that Indonesia is still has the most confidence
consumers in the world, and we can also see that the top tier mostly consist of
Asia-Pacific countries, while European and other developed countries such as
USA, Japan, and France have a below-average score. We can also concluded that
consumer confidence did move in line with GDP growth, as we can see, some of
the poor performing countries such as Greece, Spain, and Italy has a declining
consumer confidence, while top performers such as Indonesia, has an uptrend
index.
So, by knowing this fact, how can
our government reacts? There are some policies that our government can
implements, or some actions that can be done, some of the possible policies are
:
1. Control the
Consumption
What is meant by
controlling the consumption here is either to boost even more consumption or to
maintain the number of consumption in order to avoid the over-consumption.
Boosting the consumption can be done in order to increase our GDP growth even
more because in this recession era, countries are more relying on their
domestic consumption to boost their GDP, including Indonesia, but in this
country, government already had a plan to control or maintain the consumption
to GDP ratio, because research suggests that too much consumption will lead to
a higher inflation rate, hence reducing the real income of people. In line with
this policy, Indonesia’s Government is also trying to increase the investment
more as a means to boost GDP, instead of always counting on domestic
consumption, because in the future, the multiplier effect of investment is far
greater than consumption.
2. Attract more FDI
What is the
correlation between consumer confidence and FDI? As already told before that
foreign investors did take into account the CCI number, knowing that Indonesia
is one of the most confident countries, government can attract FDI, so that our
country’s growth and development can be surged, in order to achieve this,
government should really pay attention to infrastructure since it is usually
become the main reason why investors doubtfully want to invest in our country.
All in all,
consumer confidence probably is not as popular as other macroeconomics indicators
such as inflation rate, GDP growth, unemployment rate etc, and it is also not
an independent indicators, because its results affected by other macroeconomics
factors, but the advantages of this CCI is that, CCI take into account
human-psychological factors, and other non-economics factors like bombing,
politics, even terrorism, making it as one of the most reliable
subjectively-objective indicators, because it mixes the fact of a country’s
economy with the perception of the people living in that country.
Dan yang ini baru dikumpul minggu lalu, jadi belum dinilai, ya mudah-mudahan bagus lah ya membantu nilai UTS yang under-expectation hehe
"Confidence is ignorance. If you're feeling cocky it's because there's something you don't know" - Eoin Colfer, Artemis Foul -
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