● Retail sales fell for the tenth straight month in September but at a slower pace (-8.7% YoY; Aug: -9.2%)

− Mainly attributable to a broad-based slowdown led by apparel (-59.7%; Aug: -64.9%), followed by other goods (-51.8%; Aug: -56.7%) and cultural & recreation (-39.5%; -38.2%). Nonetheless, it was partially supported by a second successive month of growth rebound in food, drinks, and tobacco (3.1%; Aug: 2.7%).

− MoM: growth fell to a three-month low (-1.4%; Aug: 1.3%) due to a sharp moderation in car spare parts & accessories (0.4%; Aug: 12.0%) as well as a drop in food, drinks and tobacco (-1.2%: Aug: 2.0%).

● Retail sales are expected to fall further in October

− Real Sales Index (RSI) to fall by 10.0% YoY in October due to a broad-based slowdown observed across most commodity groups, mostly held back by food, drinks and tobacco (-0.2%). This is also in line with the worsening consumer confidence index (-33.3%; Sep: -31.6%), the level last seen in May.

● Weak YoY sales growth are expected for the next 3 months, while to rise for the next 6 months

− 3-month Sales Expectation Index (SEI): to fall by 1.6% in December (expected Nov: 8.6%).

− 6-month SEI: to increase sharply in March 2021 (16.4%; expected Feb: 7.4%).

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

− 3-month Price Expectations Index (PEI): growth contraction to edge higher in December (-6.9%; expected Nov: -5.4%).

− 6-month PEI: contraction to be reduced further in March 2021 (-2.6%; expected Feb: -0.7%).

● COVID-19 to weigh on recovery

− Indonesia continues to report a spike in coronavirus cases. As of Wednesday, new positive cases registered at 3,770 with total cases now at 448,118 and the total death toll stands at 14,836.

− While September's retail sales pointing to a recovery, we remain cautious as weak consumer sentiment and uncertainty may continue to weigh on household spending, Indonesia's main driver of economic activity.

Source: Kenanga Research - 12 Nov 2020