Indonesia trade data likely to disappoint on weak overseas demand

Indonesia’s trade data is likely to disappoint, given the ongoing poor consumption among households and persistently weak overseas demand. Bank Indonesia’s (central bank of Indonesia) policy meeting scheduled to happen this week is also eagerly awaited; while the forthcoming trade data is also expected to give important cues prior to the meet.

According to DBS Research, exports and imports are likely to shrink 4.0 percent y/y and 4.1 percent respectively in the month. A negative export growth is unlikely to trigger much reaction in the markets. However, import figures are expected to remain encouraging.

The first quarter of 2016 has seen strong rebound in imports of consumer goods. That said, it implies a pick-up in consumer demand and spending as well. Imports of consumer goods jumped 24 percent y/y in the first quarter of 2016. Despite all positivities, household consumption is expected to remain steady at five percent ahead of the Eid/Ramadan festivities, given no significant spike in consumption in the past few months.

"At a time when investment growth remains sluggish, stronger consumption growth is important for the overall GDP growth outlook," DBS commented in a report.

However, given the favorable demographics, household consumption is capable of growing at a rate above five percent per year. Discretionary spending needs to pick pace if household consumption is to be seen trending around six percent once again. Lack of boost for discretionary spending for now remains a major hurdle, DBS reported.