New vehicle sales in Indonesia increased by 23.3% year on year to 85,824 in February, from 69,590 units a year earlier, according to automotive industry association Gaikindo.

Sales rebounded strongly from sluggish annual growth in January which had fewer working days due to the Chinese Lunar New Year holidays. So the market enjoyed more working days in February compared with last year.

Some vehicle manufacturers also enjoyed strong growth on better stock availability from Thailand after automotive production was severely restricted as a result of floods in the fourth quarter of 2011. 

Cumulative sales for the first two months of 2012 rose 13% to 162,186 units, from 143,580 units a year earlier. 

The full year outlook remains uncertain, despite the country’s continued strong economic growth. The government is expected to reduce fuel subsidies in April, which could raise the price of the widely-used premium petrol by over 30% to IDR6,000 a litre (US$0.66).

This will have a negative effect on consumer spending power and will inevitably drive up inflation which will lead to higher interest rates in the short term. Already, the rupiah has weakened on the prospect of higher inflation.