Signals of weakening purchasing power are also shown by trade data, both domestic and foreign. From within the country, the performance of retail sales by Bank Indonesia (BI) in March 2023 grew 4.8 percent (yoy), indicating that the figure was not too expansive ahead of the holidays. In fact, at that time people's consumption usually soared because of the desire to consume goods for the needs of the holidays.
This data seems to be confirmed by the performance of retail issuers such as PT Mitra Adiperkasa Tbk (MAPI), PT Ramayana Lestari Sentosa Tbk (RALS), and PT Matahari Department Store Tbk (LPPF) which did not show an increase in the first quarter of 2023.
RALS recorded a stagnant net profit at the level of IDR 30 billion in the first quarter of 2023. LPPF recorded a net profit of IDR 101 billion, down from the previous year of IDR 145 billion. MAPI posted a net profit of IDR 496 billion, down from the first quarter of the previous year of IDR 647 billion.
This condition indicates that there is a downward trend in consumption because last year the Bank Indonesia (BI) benchmark interest rate was still very low. From retail issuers it is only related to primary needs (food) which are still increasing as experienced by PT Sumber Alfaria Trijaya Tbk (AMRT) by posting net profit growth from IDR 688 billion to IDR 791 billion in the first quarter of 2023.
Then from the financial reports it can be concluded that the recovery in people's purchasing power is not as good as it was before the pandemic when the interest rate era was the same as now. As a result, the company experienced an increase in cost burdens due to high inflation which could not be mitigated by increasing product prices, so that its net profit shrank.
Imports and exports weakened
Then, in addition to data from domestic, foreign data can be seen from imports which weakened 6.26 percent in a year in the March 2023 period. Weakening imports amid the stability of the rupiah against foreign currencies indicates that there is import substitution or weakening purchasing power.Signs of the occurrence of import substitution are not seen from the keen downstreaming that is occurring in the mineral sector, but from the shift of means of production which were previously imported to being self-produced.
This cannot yet be used as a benchmark because the contribution of manufacturing to Indonesia's Gross Domestic Product (GDP) is still very low with a ratio of 18.3 percent. Indonesia's exports have also begun to erode, dropping by 11.3 percent in a year as a result of commodity prices starting to underpin.
Manufacturing sector
Weakening imports amid the relatively stable rupiah currency indicates a decline in demand for imported goods that are often used for industry. The manufacturing index, which reached 52.7 in April 2023, has reached an expansive level, above 50, which is often disturbed by various demand pressures from Europe.Weak demand from Europe has forced a number of textile manufacturing companies to experience factory closures, as experienced by textile companies producing the brands Puma to Nike, which laid off 1,163 workers. The government has also tried to generate demand for textiles by suppressing thrifting goods, but this alone is not enough because the demand for goods from imported Chinese goods which are relatively cheap are widely available in the market.
Inflation is sloping
BPS (Central Statistics Agency) announced inflation in April 2023 to be 0.33 percent. This is lower than inflation during Ramadan and Eid 2022 of 0.40 percent. Low inflation can occur when demand is weak in an era of high interest rates.However, a survey by Bank Indonesia (BI) indicates that in the second quarter there will be even faster credit flows. The survey shows that business actors will start expanding in the second quarter of 2023, so that they will start extending credit.
This survey illustrates that business actors are still observing global economic conditions before deciding to invest. In the midst of a dynamic global economic situation, the survey results may change by observing the behavior of the Fed and global geopolitics.
The government is also waiting for a tough task to achieve the target of economic growth beyond 2022 with a focus on prioritizing the growth of new jobs with the entry of investment. The task carried out by the Job Creation Law, which according to the President of the Labor Party, Said Iqbal, can actually undermine workers' welfare. (Kevin Omar Schreiber)
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