Indonesia motorcycle sales plunge on trimming household consumption

Indonesia’s motor cycle sales for the month of May plunged from the previous month's figure as household consumption, a major component of measuring consumer spending, deteriorated.

Motorcycle sales fell 1.7 percent y/y in May, as compared to the 8.9 percent fall in April. Currently, motorcycle sales are trending at about 500,000 per month, lowest since 2009. Indeed, discretionary spending has averaged 4.8 percent over the past year, as compared to the 5.7 percent average seen in 2012-14.

Motorcycles are prominently popular in Southeast Asia’s biggest economy and hence, their sales are a key indicator for consumption. The major decline in sales was led by Honda Motor Co Ltd, Yamaha Motor Co Ltd and Kawasaki, the data showed.

Indonesia lags in terms of discretionary spending compared to non-discretionary spending among households While household consumption is likely to chalk a decent 5 percent growth, any risks to the upside seems limited for the time being, without any help from discretionary spending, DBS reported.

"External demand is unlikely to be much of a help and exports are still likely to shrink this year. As long as household consumption is steady circa 5 percent then, overall GDP growth will not deviate too much from 5 percent as well," DBS commented in a research note.

However, overall gross domestic product is expected to grow only as much as household consumption grows, with investment gaining momentum only at a gradual pace through the year.