Consumer Confidence Is Rising. Why Is Retail Sales Growth Still Weak?

Indonesian consumers entered August 2026 with greater confidence. The Consumer Confidence Index rose from 116.8 in July to 118.5. A reading above 100 indicates that consumers remain in the optimistic zone.

That optimism has not yet been fully reflected in retail sales. Bank Indonesia estimated that the Real Sales Index grew by only 0.5% from August 2025. Growth remained positive, but it was weaker than the realised 1.1% increase recorded in July.

The two readings are not contradictory. The Consumer Confidence Index measures perceptions of current conditions and expectations for the next six months. The Real Sales Index tracks retail sales trends through a survey of retailers. Consumers may expect the economy to improve while still postponing purchases because of income constraints, debt payments, prices, or the need to preserve savings.

Indonesia’s Consumer Confidence Index, Current Economic Conditions Index, and Consumer Expectations Index in August 2026. Source: Bank Indonesia, August 2026 Consumer Survey, published September 9, 2026. 

Confidence Is Not the Same as a Shopping Receipt

The Consumer Confidence Index consists of two main components. The Current Economic Conditions Index measures how consumers view conditions today, while the Consumer Expectations Index reflects their outlook for the next six months.

The August 2026 movements were:

• Consumer Confidence Index increased by 1.7 points from 116.8 to 118.5.

• Current Economic Conditions Index increased by 1.5 points from 107.9 to 109.4.

• Consumer Expectations Index increased by 1.9 points from 125.7 to 127.6.

These changes indicate improving sentiment, but the readings are index points rather than percentages. An index of 118.5 does not mean consumer spending increased by 18.5%.

The difference between current conditions and future expectations is also notable. The Consumer Expectations Index stood at 127.6, while the Current Economic Conditions Index was 109.4. The 18.2-point gap shows that consumers were considerably more positive about the next six months than about present conditions.

The gap does not prove that consumption will surge. It does help explain why confidence can improve while retail sales remain subdued. Part of the optimism still reflects expectations about future income, employment, and business activity.

The August Retail Figure Is Still a Forecast

The 0.5% retail growth figure for August requires an important qualification. It remains a survey forecast rather than a final realised figure.

In its August 2026 Retail Sales Survey, Bank Indonesia estimated that retail sales grew by 0.5% year on year. The main support came from spare parts and accessories, followed by food, beverages, and tobacco.

On a monthly basis, sales were estimated to have declined by 0.1%. The weakness was mainly driven by the “other goods” category, while information and communication equipment, automotive fuel, and spare parts and accessories recorded growth.

The latest realised data were for July 2026. The Real Sales Index grew by 1.1% year on year after contracting by 3.0% in June. On a monthly basis, July sales declined by 0.1% as demand normalised following religious holidays and school holidays.

The move from 1.1% realised growth in July to a 0.5% forecast for August represents a slowdown of 0.6 percentage points. It should not be described as a 54.5% fall because the figures are growth rates, not absolute sales values.

Forecast Real Sales Index growth for August 2026 and realised growth for July 2026. Source: Bank Indonesia, August 2026 Retail Sales Survey, published September 10, 2026. 

Why Can Confidence Rise Faster Than Retail Sales?

A. Expectations Look Forward, While Sales Measure Current Activity

Consumers may become more optimistic because they expect income, employment opportunities, or business conditions to improve over the next six months. Those expectations do not necessarily change spending decisions immediately.

Households may wait until the improvement appears in the form of higher income, more secure employment, or lower expenses. Sentiment can therefore work as a leading indicator, but it does not guarantee an immediate increase in transactions.

B. Purchasing Power Is Uneven

The national index combines consumers with very different spending capacities.

The Consumer Survey showed that the highest confidence reading in August was recorded among respondents spending more than Rp5 million per month, at 123.9. By age, the highest reading was among respondents aged 20 to 30, at 123.3.

The difference was more visible in durable-goods purchases. The durable-goods index was optimistic for consumers with monthly expenditure above Rp3.1 million. Lower expenditure groups remained in the pessimistic zone.

Aggregate confidence can therefore improve without producing a broad increase in purchases of vehicles, electronics, furniture, and other high-value goods. Optimism may be stronger among consumers with more financial room, while other households remain focused on essential spending.

C. Household Income Is Used for More Than Retail Goods

The August Consumer Survey showed that the average share of income used for consumption rose from 72.7% in July to 74.2%. The share allocated to debt instalments declined from 10.5% to 10.0%, while the savings share fell from 16.8% to 15.8%.

At first glance, the higher consumption share should support retail sales. The two surveys, however, have different coverage.

The household-income composition comes from consumers’ responses about how they use their income. The Retail Sales Survey covers approximately 700 retailers in ten cities and focuses on specific groups of goods. Household spending on rent, education, transportation, healthcare, digital services, entertainment, and other services is not necessarily reflected in the Real Sales Index to the same extent.

A rising consumption share can also result from declining savings rather than higher income. If households spend a larger share of income merely to maintain the same necessities, the change does not automatically indicate stronger purchasing power.

D. Calendar Effects Change Monthly Comparisons

Retail sales often move around Ramadan, Eid, the start of the school year, school holidays, bonus payments, promotional periods, and national holidays.

Bank Indonesia stated that the monthly decline in July was influenced by normalisation after religious holidays and school holidays. Some weakness may therefore reflect a shift in the timing of purchases. Consumers may have brought purchases forward and then reduced spending in the following month.

Calendar effects make a single monthly reading easy to misinterpret. Year-on-year growth, month-on-month changes, and trends across several months should be assessed together.

What Does 0.5% Growth Actually Show?

Forecast growth of 0.5% year on year means real retail sales were expected to remain above their August 2025 level. The pace was nevertheless weak and uneven across product categories.

Because the indicator is the Real Sales Index, it is intended to track sales after accounting for price movements under the survey methodology. The rupiah value of spending can increase more rapidly because prices rise, even when the real volume of goods sold changes only slightly.

The 0.5% figure is not enough to conclude that all consumers are cutting spending. It also does not prove that national purchasing power is deteriorating. The survey covers approximately 700 retailers in ten cities, making it an early indicator rather than a census of all Indonesian retail transactions.

A more measured interpretation is that goods consumption was still growing, but momentum remained weak and concentrated in a limited number of categories.

Lower Price Expectations Do Not Mean Deflation

The Retail Sales Survey also showed that the General Price Expectations Index for October 2026 declined to 146.5 from the previous reading of 155.2. The January 2027 index declined from 168.1 to 166.0.

The lower readings indicate that expected price pressure eased compared with the previous survey. Index readings of 146.5 and 166.0 do not represent inflation forecasts of 46.5% or 66.0%.

Lower price expectations could support consumer sentiment if they are followed by controlled actual inflation. The effect on spending still depends on household income. Slower price growth does not automatically strengthen consumption if wage growth, employment, and access to credit remain constrained.

What Does This Mean for the Economy and Financial Markets?

Household consumption is an important part of Indonesia’s economic activity. When confidence rises while retail sales grow only modestly, market participants need to distinguish between an early signal and a realised outcome.

For retail companies, the composition of growth may be more useful than the aggregate figure. Stronger sales of spare parts and accessories do not mean that clothing, electronics, and household goods are experiencing the same demand.

For monetary policy, weak retail sales could indicate that demand pressure remains contained. Bank Indonesia must still consider inflation, the rupiah, capital flows, and financial stability. One retail-sales report is not sufficient to determine the direction of interest rates.

For risk assets, including equities and crypto, improving consumer confidence can support domestic sentiment. The relationship is indirect. Digital-asset prices are generally more sensitive to global liquidity, interest rates, the US dollar, spot and derivatives flows, and asset-specific developments.

What Should Be Monitored Next?

The gap between confidence and retail sales will become clearer after several additional releases. Relevant indicators include:

• The realised August 2026 Real Sales Index, since the current 0.5% figure is still a forecast.

• The September Consumer Confidence Index and whether optimism is sustained.

• Changes in the shares of household income allocated to consumption, debt payments, and savings.

• Actual inflation, particularly food, transportation, and housing costs.

• Consumer-credit growth and non-performing loan ratios.

• Income, employment, and wage indicators.

• Retail growth by product category rather than only the headline index.

If confidence remains high, employment conditions improve, and retail growth broadens across categories, optimism may be turning into realised transactions. If confidence stays elevated while savings continue to fall and real sales weaken, households may be more optimistic about the future while still facing present budget pressure.

Conclusion

Higher consumer confidence and weak retail-sales growth are not mutually exclusive signals. They measure different conditions and use different time horizons.

In August 2026, consumers reported better current conditions and stronger expectations for the next six months. Yet retail sales were forecast to grow by only 0.5% year on year and decline by 0.1% month on month. Growth was also uneven across product and expenditure groups.

The most useful signal is not simply whether the Consumer Confidence Index is above 100. The next question is whether that optimism is followed by stronger income, broader durable-goods purchases, stable savings, and retail growth that extends beyond one or two categories.

Disclaimer

This article is provided for informational and educational purposes only. It does not constitute investment advice or a recommendation to buy or sell any asset. The August 2026 Real Sales Index figure remains a survey forecast and may differ from the subsequent realised reading. Readers should consult the latest Bank Indonesia publications before making financial or investment decisions.