MacroInsight  /   Click here for full PDF version 
 Author(s):  Kefas Sidauruk 

• Household consumption eased in 3Q25, but high-frequency data showed signs of recovery toward quarter-end.
• Sentiment improved in early 4Q25, a positive sign, but consumers still face some challenges i.e. higher loan repayment rate.
• Better employment condition, ongoing fiscal stimulus, and higher business confidence could sustain the purchasing power recovery.

Household spending slowed in 3Q25 but signs of recovery is emerging
Household consumption growth moderated to +4.89% yoy in 3Q25 (+4.97% in 2Q25), indicating a mild slowdown in spending momentum. However, high-frequency indicators suggest an improvement toward quarter-end. In Sep25, retail sales rose +3.7% yoy, while the PMI Manufacturing survey showed new orders increasing for a second consecutive month. Big ticket items demand also improved -- 4W sales contraction narrowed to -15.1% yoy (May-Aug25 avg: -18.4% yoy) and 2W sales surged to +7.3% yoy. Residential house sales contraction shrank while commercial property demand growth jumped to 3Y high at 1% yoy. Moreover, durable goods purchases rose annually for the first time since Jan25, signalling a gradual recovery in household demand.
Early 4Q25 data showed purchasing power recovery, albeit still held back by loan repayment
In Oct25, Bank Indonesia's data showed improvement, though momentum remains uneven. Consumer confidence jumped to 121.2 (from 115.0 in Sep25), supported by stronger sentiment in current income and durable goods purchases. However, rising optimism has yet to fully translate into higher spending. Loan repayment ratios continued to climb (3M rolling average: 11.2% - the highest since COVID), while savings rates also increased across all expenditure groups for the first time this year, reducing disposable income available for consumption. As a result, retail sales rose modestly by +4.3% yoy (+3.7%/+3.9% in Sep25/3Q25). Other indicators showed a similar pattern: two-wheeler sales accelerated to +8.4% yoy, while passenger car sales still contracting but narrowed to -4.4% yoy, reflecting a gradual recovery in purchasing power.
Labor market turnaround could sustain purchasing power recovery
The recovery may be sustained by two key factors: government stimulus and improving employment conditions. Beyond government's labor data, labor market signals remain encouraging. (1) Bank Indonesia's consumer survey showed optimism on job availability turning positive for the first time since May25. (2) Active job postings continued to rise, reaching a 2.5-year high (~57K, 4W rolling average) according to Revelio data. (3) The Indonesia Manufacturing PMI survey reported employment growth for the third straight month, reflecting greater business confidence among manufacturers and a healthier hiring outlook ahead.
Stronger YE25 sales expectation support 4Q25 consumption
The number of retailers expecting higher sales toward year-end reached its highest level since the survey began (based on the next 3-month sales expectation survey as of Sep25). This optimism, combined with improving job conditions, provides a positive signal for spending momentum. Considering these factors, we maintain our view that household consumption will grow c.+ 5.05% yoy in 4Q25, bringing FY25 household consumption growth to 5.0% -- a tad higher than the past three years (FY22/23/24: +4.94%/+4.82%+4.94% yoy).


Sumber : IPS