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Indonesia's Consumer Confidence Eases in May as Current Economic Conditions Weigh on Sentiment

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Indonesia's Consumer Confidence Eases in May as Current Economic Conditions Weigh on Sentiment

Indonesia's consumer confidence slid in May, though it remained firmly in optimistic territory as consumers continue to expect better economic conditions ahead.

The Consumer Confidence Index (CCI) fell to 120.9 from 123.0 in the previous month, remaining above the neutral 100-point threshold, according to a Wednesday release from Bank Indonesia.

The decline was driven by the disparity between consumers' sentiment on current economic conditions and their expectations. The Current Economic Conditions Index slipped to 112.2 from 116.5 a month ago, while the Consumer Expectations Index, which tracks future outlooks, edged up slightly to 129.7 from 129.6.

Under the current economic conditions, expectations for job availability and business activity remained high, but expectations for income slightly turned cautious.

Meanwhile, the outlook for job availability and business activity in the coming months was also positive among various age groups surveyed for the Consumer Expectations Index.

Data from Statistik Indonesia showed a strong labor market, with the number of employed people in February rising by 1.90 million to 147.7 million, while unemployment declined by 0.08 percentage points year on year to 4.68%. Official labor records for the March-to-May period have not yet been published.

Consumer confidence remained upbeat in Indonesia after the country's manufacturing sector stabilized amid robust demand. The S&P Global Indonesia Manufacturing Purchasing Managers' Index rose to 50.0 in May from 49.1 in April.

Along with a stable manufacturing activity, inflation in May rose to 3.08% due to higher prices of goods. Meanwhile, exports and imports jumped around 22% year on year, narrowing the country's trade surplus to $89.1 million in April.

Bank Indonesia on Tuesday delivered a surprise, off-cycle 25-basis-point rate hike, raising its benchmark interest rate to 5.50% in a bid to support the weakening rupiah.

Krystal Tan, ANZ's Asia Economist, said Indonesia's monetary policy reacted to both external and domestic circumstances.

"The off-cycle nature of today's rate hike, delivered nine days ahead of BI's scheduled monthly policy meeting, underscores the urgency of current pressures and suggests a willingness to respond more dynamically to evolving market conditions," Tan said.

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