Spending Recovers, Consumers Stay Selective

Indonesia’s August consumer data tell two different stories.

Consumer confidence improved.

Bank Indonesia’s Consumer Confidence Index rose to 118.5, from 116.8 in July.[1]

Current economic conditions improved, while expectations remained strongly optimistic.[1]

Retail sales, however, are recovering more cautiously.

The Real Sales Index grew 1.1% year on year in July, recovering from a 3.0% contraction in June.

August sales were expected to grow only 0.5% year on year and contract 0.1% month on month.[2]

The implication is important.

Consumers can feel more confident without spending aggressively.

Confidence and spending are different indicators

Confidence measures perceptions and expectations.

Retail sales measure actual purchasing activity.

People can feel optimistic while still delaying major purchases, comparing prices, buying less frequently or prioritising essential categories.

That makes optimism useful—but not equivalent to demand.

The broader economy remains solid

Indonesia’s economy expanded 5.29% year on year in Q2 2026.[3]

This is not a recessionary environment.

A better interpretation is that consumers are still participating in the economy, but spending decisions are becoming more deliberate.

Retail recovery remains modest

July’s return to 1.1% growth was clearly better than June’s contraction.

But it was not a boom.

August’s expected 0.5% expansion suggests that momentum remains soft.

Retailers should therefore avoid interpreting positive growth as a signal to overbuild inventory.

Categories are behaving differently

Bank Indonesia expects August growth to be supported by spare parts and accessories as well as food, beverages and tobacco.[2]

Information and communications equipment and automotive fuel also showed monthly strength.

Other categories were weaker.

This is why aggregate sales data can conceal important differences in demand.

Consumers may be reducing frequency rather than trading down

A selective shopper does not necessarily switch to the cheapest product.

They may:

buy the same brand less often;

wait for a promotion;

purchase a smaller pack;

skip add-ons;

or reduce impulse purchases.

That is different from simple down-trading.

For businesses, frequency and basket size need to be analysed separately.

Promotions can become addictive for brands too

Discounting can increase traffic.

But if sales happen only during promotions, the business may be purchasing demand at the expense of margin.

Retailers should measure full-price sales, promo uplift, repeat behaviour after discounts and customer dependency on vouchers.

Pricing needs more precision

Broad-based price cuts or increases can be too blunt in a selective market.

Businesses need SKU-level understanding.

Which products are price sensitive?

Which are convenience-driven?

Which have stronger loyalty?

Which are easily substituted?

Pricing should follow behaviour.

Improved confidence still creates opportunity

A confidence index of 118.5 remains in optimistic territory.[1]

That matters.

Customers who feel relatively positive are not necessarily unwilling to spend.

They simply need a stronger reason.

The strategic opportunity is therefore in clearer value propositions.

Compete for share of wallet

When household spending grows slowly, brands increasingly compete for a fixed or slowly expanding wallet.

Traffic alone is not enough.

The real objective is to become one of the purchases customers choose to keep.

Inventory planning becomes more valuable

Modest demand growth makes forecasting errors expensive.

Too much inventory leads to discounting and tied-up working capital.

Too little creates stockouts.

Retailers need to watch sell-through, days of inventory, category velocity, promotional effects and channel mix.

Consumer behaviour is not uniform

Income, location, age and household structure all matter.

Jakarta, for example, grew 5.52% year on year in Q2, with household consumption representing 63.24% of expenditure structure.[4]

That does not mean Jakarta’s spending patterns represent all of Indonesia.

National brands need segmentation.

Retail data should become operational

Businesses should monitor:

average basket size;

purchase frequency;

repeat rates;

discount dependency;

product substitution;

refunds;

and channel migration.

Revenue alone can hide important behavioural change.

Marketing messages may need to shift

Selective consumers often respond more strongly to:

usefulness;

durability;

service;

reliability;

versatility;

and value.

This does not mean every brand needs to become cheap.

It means the reason to buy must become clearer.

Premium brands should not panic

Selective consumption does not eliminate premium demand.

But frequent discounting can damage premium positioning.

Service, exclusivity, convenience and experience may protect value better than repeated price cuts.

F&B needs to watch ticket size, not only traffic

Customers may still visit restaurants but order fewer add-ons or come less often.

Traffic can therefore remain healthy while economics weaken.

Operators need to monitor frequency, ticket size and attachment rates.

Fashion needs to understand wardrobe substitution

Fashion customers may purchase fewer items while choosing more versatile pieces.

That should shape assortment strategy.

More SKUs are not always the answer.

The data point to caution, not collapse

Confidence is improving.

Retail sales remain positive.

GDP is growing.

The consumer is not disappearing.

But spending momentum remains moderate.

The winning question for business is no longer simply:

“How do we generate traffic?”

It is:

“How do we remain one of the purchases customers decide is worth keeping?”

In a selective market, the strongest brand is not necessarily the cheapest.

It is the one that makes the value of buying now easiest to understand.