Indonesia’s Consumer Confidence Hits Lowest Since October Amid Economic Strain

Indonesian households are grappling with mounting economic uncertainty as consumer confidence plummets to its lowest level since October 2024, driven by dimming job prospects and escalating living costs. The latest monthly survey from Bank Indonesia (BI), released on Tuesday, paints a stark picture of a nation increasingly pessimistic about both current conditions and future economic stability, raising concerns about the sustainability of domestic demand as a key driver of growth.

Declining Confidence and Broad-Based Pessimism

The BI’s consumer confidence index (CCI) fell by 5.3 points to 121.1 in March, marking the third consecutive month of decline from February’s reading of 126.4. According to BI spokesperson Ramdan Denny Prakoso, this downturn reflects a deepening unease among consumers about the state of the economy now and in the months ahead. Both major components of the index—the current economic index and the economic outlook index—slipped to 110.6 and 131.7, respectively, with all six sub-components showing weaker readings.

The most significant drop was in perceptions of job availability, which plummeted 8.3 points to 125.9. Views on job conditions compared to six months prior also edged close to neutral territory, falling 5.9 points to 100.3. This growing anxiety over employment aligns with reports of over 90,000 layoffs across the country since the start of 2024, a trend that has particularly affected the urban middle class. Sluggish consumer spending in the first quarter of 2025 has compounded these challenges, further dampening sentiment.

Urban Middle Class Under Pressure

The urban middle class, often seen as a backbone of Indonesia’s consumer-driven economy, is feeling the squeeze most acutely. Rising costs of living, coupled with stagnant real wages, have eroded discretionary spending power. Fithra Faisal, a senior economist at Samuel Sekuritas Indonesia (SSI) Research, highlighted the broader implications of this trend in a statement on Tuesday. “Looking forward, the persistent erosion in consumer sentiment poses a significant risk to domestic demand, particularly consumption, which remains a key engine of GDP growth” he said.

Faisal also cautioned that if confidence continues to wane, Indonesia’s projected GDP growth for 2025—already forecasted at under 5 percent—could face further downward pressure. He noted that households might shift toward precautionary savings, a behavioral change that could suppress retail and service sector activity at a time when the economy can ill afford additional headwinds.

Inflation and Currency Woes Add to Economic Strain

While headline inflation remains relatively subdued at 1.03 percent year-on-year in March—below BI’s target range of 1.5 to 3.5 percent—a monthly spike of 1.65 percent hints at underlying price pressures. More troubling is the performance of the Indonesian rupiah, which recently tumbled to a multi-year low, briefly touching Rp 17,217 per US dollar before recovering slightly to around Rp 16,800. This depreciation, exacerbated by renewed trade tensions following US President Donald Trump’s tariff proposals, has raised fears of imported inflation and further strain on household budgets.

On March 25, the rupiah hit Rp 16,642 against the dollar, its weakest level since the 1998 Asian Financial Crisis. This volatility has sparked concern among policymakers and economists alike, as a weaker currency could drive up the cost of imported goods, hitting consumers already stretched thin. Faisal warned that with the rupiah under pressure and real wages stagnating, the drag on discretionary spending could intensify, particularly for vulnerable middle-income groups.

Household Expectations and Behavioral Shifts

The BI survey also revealed a notable decline in expectations for household income over the next six months, which dropped 6.3 points to 137.0. However, a modest uptick of 1.4 points in current income expectations—likely tied to seasonal bonuses or minimum wage adjustments—offered a small glimmer of relief. Still, the overall mood remains cautious, with many Indonesians bracing for tougher times ahead.

Economists fear that sustained pessimism could lead to lasting changes in consumer behavior. As Faisal noted, a move toward precautionary savings could further dampen economic activity in key sectors like retail and services. This shift would be particularly damaging in a country where private consumption accounts for a significant share of GDP. If households continue to tighten their belts, the ripple effects could be felt across small businesses, urban markets, and even larger corporations reliant on domestic demand.

Broader Economic Implications

Indonesia’s economic challenges are unfolding against a backdrop of global uncertainty, with trade tensions and geopolitical risks adding to domestic woes. The rupiah’s recent struggles, for instance, are not merely a local issue but a reflection of broader market jitters over US trade policies and their potential to disrupt export-driven economies like Indonesia’s. While the country has made strides in diversifying its economic base in recent years, it remains vulnerable to external shocks, particularly in commodities and manufacturing—sectors that employ millions.

Domestically, the wave of layoffs since 2024 signals deeper structural issues in the labor market. Many of the job losses have been concentrated in urban areas, where the cost of living is highest, leaving middle-class families with fewer financial buffers. Government initiatives to stimulate employment and consumer spending have so far yielded mixed results, with critics arguing that more targeted support—such as subsidies for essential goods or incentives for small businesses—is needed to shore up confidence.

At the same time, BI faces a delicate balancing act. With inflation below target, there may be room for monetary easing to stimulate growth. However, a weakening rupiah limits the central bank’s ability to cut interest rates without risking further currency depreciation. Analysts expect BI to maintain a cautious stance in the coming months, closely monitoring both domestic sentiment and global developments.

A Glimpse into Everyday Struggles

Beyond the numbers, the decline in consumer confidence is palpable on the streets of Jakarta and other urban centers. Women shopping at roadside stalls during lunch breaks, as captured in images from late 2024, reflect a broader reality: even small purchases are becoming a source of hesitation for many. The urban middle class, once a symbol of Indonesia’s economic progress, now finds itself navigating a landscape of uncertainty, where every rupiah spent is weighed against an unclear future.

For now, the government and BI are under pressure to address these mounting concerns. Proposed measures to boost job creation and stabilize the currency are being discussed, though their effectiveness remains to be seen. Some economists advocate for short-term relief programs, such as cash transfers or price controls on essential goods, to alleviate the burden on households. Others argue for longer-term reforms to enhance labor market flexibility and attract foreign investment, which could provide a more sustainable path to recovery.

Looking Ahead

As Indonesia grapples with these economic headwinds, the trajectory of consumer confidence will be a critical indicator of the nation’s resilience. With layoffs continuing to mount and global uncertainties looming, the road to recovery appears fraught with challenges. Yet, there remains hope that targeted policy interventions and a stabilization of external conditions could help restore faith in the economy. For millions of Indonesians, the question is not just when relief will come, but whether it will arrive in time to prevent deeper economic scarring.