● Retail sales fell for the ninth straight month in August, but growth contraction eased (-9.2% YoY; Jul: -12.3%)

- Mainly attributable to a broad based slowdown led by apparel (-64.9%; Jul: -66.5%), followed by other goods (-56.7%; Jul: - 60.3%) and cultural & recreation (-38.2%; -38.7%), while partially weathered by a growth rebound in food, drinks and tobacco (2.7%; Jul: -1.9%).

- MoM: growth expanded (1.3%; Jul: 0.3%) reflecting continued improvement in purchasing activities.

● Retail sales are expected to see furtherimprovement in September, albeit remaining in contraction for the tenth straight month

- Real Sales Index (RSI) to fall by 7.3% YoY in September, supported by the second month of growth rebound in food, drinks and tobacco (5.1%; Aug: 2.7%) despite weakening consumer confidence index (-31.6% YoY; Aug:-29.4%) which deteriorated significantly in Jakarta.

● Positive sales are expected for the next 3 to 6 months

- 3-month Sales Expectation Index (SEI): growth to expand sharply by 8.6% in November (expected Oct: 2.1%).

- 6-month SEI: growth to expand by 7.4% in February 2021 (expected Jan: 2.8%).

● Subdued inflationary pressure is expected for the next 3 to 6 months

- 3-month Price Expectations Index (PEI): Price to fall sharply by 5.4% YoY in November (expected Oct: -2.4%).

- 6-month PEI: marginal growth contraction in February 2021 (-0.7%; expected Jan: -9.8%).

● COVID-19 resurgence fears and severe weather conditions to exert pressure on retail sales

- Indonesia continues to record a high number of new COVID-19 cases with many cases concentrated in Jakarta. The Jakarta's administration in September reimposed partial lockdown to curb the virus from spreading. Meanwhile, President Jokowi recently has called for mini lockdowns in areas such as villages and towns amid a surge in COVID-19 cases.

- The measures are expected to affect consumer spending habits and income instability. Coupled with severe weather conditions, we expect retail sales to remain weak in the near term.

Source: Kenanga Research - 9 Oct 2020