Household Consumption in 2024 to Grow Below Expectations, Signaling Weak Purchasing Power

The Central Statistics Agency (BPS) reported that Indonesian household consumption expenditure grew by 4.98% year-on-year (yoy) in the fourth quarter of 2024.

Cumulatively, it grew by 4.94% (cumulative-to-cumulative/ctc) throughout 2024. This figure is still higher than the consumption growth in 2023, which was 4.82% (ctc).

However, the realization of household consumption growth was not greater than economic growth.

BPS reported that economic growth in the fourth quarter of 2024 was 5.02% (yoy). Cumulatively, it grew by 5.03% (ctc).

Economic growth also slowed compared to the previous year, which reached 5.05% (ctc). According to Katadata, this economic growth achievement is also lower than the government's target in the 2024 State Budget (APBN), which was 5.2%.

Household consumption expenditure is positively correlated with economic growth. Increased consumption drives demand for goods and services, leading to production and a more vibrant economy.

Furthermore, the Acting Head of BPS, Amalia Adininggar Widyasanti, stated that household consumption remains the main pillar of the Gross Domestic Product (GDP).

"The main contributors to GDP by expenditure component are household consumption and PMTB," said Amalia at a press conference on Wednesday (5/2/2025).

She explained that several domestic factors influenced economic growth, especially in the fourth quarter of last year. From the perspective of public consumption, the real sales index only grew by 1.1% in the fourth quarter of 2024 and 3.01% cumulatively for the year. Motorcycle sales contracted by 3.06% year-on-year, but increased by 1.54% quarter-on-quarter.

Looking at the cumulative trend, household consumption expenditure lower than economic growth has occurred since Covid-19 or 2020.

Weak public consumption indicates several things, including declining purchasing power, pressure on the middle class and other classes, overall economic slowdown, and deflation or economic stagnation.

(See also: Indonesia's Economic Growth Slowed in 2024)