Indonesia's consumer base is maturing.

A consensus has developed here at the beginning of 2007 that the Indonesian economy expanded well in 2006 and will expand further during 2007. The International Monetary Fund (IMF) estimates that GDP growth for Indonesia in 2006 was 5.2 percent compared with 5.6 percent in 2005. The IMF's estimate for 2007 GDP growth is 6.0 percent.

To this optimism are added the striking results of the above graph. The graph shows a rather dramatic trend developing over the past eight years and extending through 2007. The graph plots annual average per capita monthly change in the way Indonesian households spend their money. The basic data comes from Indonesia's four household surveys from which Market: Asia Pacific Statistical Analysis has projected estimates from the years listed in the graph caption above.

Since Indonesia's household surveys cover all income segments of the population, and since the sample size for the surveys is large (10,000 respondents) the estimates of the missing years are likely to reflect an accurate picture of what is hap pening to consumer spending in the country.

As can be easily seen in the graph, the central development is a move away from spending mostly on food to spending mostly on non-food purchases.

This is highly significant.

It is significant because Indonesia's consumers are signaling the confidence they have in the economy and their place in it by their actions and not, exclusively, by their opinions.

Indonesian consumers are showing that they can move away from purchases that are related to merely staying alive and toward expenses that are more discretionary. In a sense, this is the first concrete sign that the country's population-as opposed to only wealthy urban residents-is slowly but surely graduating into a genuine consuming middle class.

What this does not mean, though, is that there will be sudden mass demand for flat panel TVs or SUVs. This is only a first sign, and the fact that the trend has persisted over eight years makes it feel not just visible but established as well.

In a related development, Indonesia's Coordinating Ministry for Economic Affairs in its news summary for January 8, 2007, commented on an AC Nielsen survey of consumer attitudes. "Most Indonesian consumers are optimistic about 2007, with the further improvement of key economic indicators continuing to brighten prospects for jobs and personal finances, a survey revealed," said the Ministry.

The Ministry cited The Jakarta Post as the source for the additional survey detail that 68 percent of Indonesian consumers polled in the study were optimistic about their personal finances over the next 12 months. Significantly, 9.0 percent of Indonesians said that they expected, "Their financial status will be excellent in 2007."

Indonesia's optimism for 2007 was second only to India in the region where 71 percent of respondents said their prospects for 2007 were good. Australia posted the third highest optimism in the region with 66 percent of consumers there saying that 2007 would bring good personal financial results. Indonesians rated their employment prospects highly-at 64 percent.

One caveat about the AC Nielsen survey: It was conducted on the Internet meaning that respondents were likely drawn from upper income segments.

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