Inflation fears crimp motorcycle sales in Indonesia

18-May-2012 Intellasia | Jakarta Globe | 7:01 AM Print This Post

Indonesian consumers, fearful of a spike in inflation, bought fewer motorcycles last month – a sign that economic growth might be slowing from the fastest pace in 15 years.

Domestic motorcycle sales fell 14 percent to 617,508 units in April from 705,226 units a year earlier, data from the Indonesian Motorcycle Industry Association (AISI) released on Monday showed. In March 619,678 units were sold. For the January-April period motorcycle sales dropped 5.1 percent to 2.55 million units.

Motorcycle sales are considered a useful indicator of broader economic performance. “This year is indeed a tough year for the consumer sector,” Destry Damayanti, an economist at Bank Mandiri, said on Monday.

Destry said consumers appeared worried about inflation, specifically a rise in fuel prices, and were holding back from purchasing durable and expensive items such as motorcycles and cars. “The central bank has also a role in this as it seeks to curb consumption,” Destry said.

Sales of motorcycles, like these ones at a showroom in Palu, Central Sulawesi, are forecast to rise just 3 percent this year. (AFP Photo/Basri Marzuki)

From June, consumers seeking loans to buy motorcycles will have to pay at least 25 percent of the cost up front, as opposed to as little as 5 percent now.

The rules are being introduced by Bank Indonesia and the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) in an effort to curb excessive lending and reduce loan defaults.

Car sales have also slowed on a monthly basis. Car sales dropped to 87,060 units in April, from 87,761 units in March. In the first four months of the year, however, sales reached 337,663 units, up 18 percent from a year before.

Pandu Anugrah, a Jakarta-based analyst at Kim Eng Securities, said motorcycle sales growth this year would slow to about 3 percent from 9 percent in 2011, when 8.1 million motorcycles were sold.

Given that the down payment rule is due to start in June, he estimated average car sales average would fall in the second half to 73,000 units per month from around 84,000 units in the first half.

According to the latest data from Bank Indonesia, growth in consumer loans – which typically are used for vehicle purchases, mortgages and credit cards – slowed to 21 percent in the first quarter from 24 percent in the fourth quarter of last year.

Indonesian consumers are going into “careful” mode, Destry said.

Bank Indonesia’s survey of 4,700 households released earlier this month found the index of consumer confidence was down 4.8 points to 102.5, the lowest level since November 2010, when it stood at 102.2. A score of more than 100 means consumers are largely upbeat about the future of the nation’s economy, while a score below 100 indicates pessimism is more prevalent.

Almost one-third of respondents in the survey said they were worried about possible increases in food prices, following uncertainty about the government’s plan to raise the price of subsidised fuel, which it was ultimately forced to postpone by the House of Representatives.

Destry said that with consumption slowing, the country’s economic growth would rely more on investment and government expenditure.

At present, personal spending accounts for about 60 percent of economic activity in Indonesia.

The World Bank last month cut its forecast for Indonesia’s economic growth this year to 6.1 percent from an earlier 6.2 percent projection, citing slow global economic development and the negative impact of an increase in global oil prices. The government estimates 6.5 percent growth this year.


Category: Indonesia

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