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View all search resultsRI factory activity contracts as ASEAN peers gain
Indonesia’s manufacturing sector has slipped back into contraction territory as weaker output and employment offset a modest recovery in new orders, according to S&P Global.
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Quality control: A worker inspects the quality of product on Oct. 4, 2019, at a steel factory in the Cikarang industrial estate in Bekasi, West Java. (Antara/Fakhri Hermansyah)
T
he mood on Indonesian factory floors has soured again as a key indicator slipped back into contraction territory while some ASEAN peers have seen significant improvement.
S&P Global’s Indonesia Manufacturing Purchasing Managers’ Index (PMI) fell to 49.8 in August from 50.2 in July, returning below the 50-point threshold that separates expansion from contraction.
The reading pointed to broadly stable business conditions midway through the third quarter but marked a reversal from the improvement recorded in July. Renewed declines in manufacturing output and employment were the main factors weighing on the sector’s performance.
Companies attributed declining output to stronger competition, subdued demand and higher input costs. Production has now decreased in five of the past six months.
Employment also returned to contraction territory, as some manufacturers cut payrolls in response to lower production requirements, while others struggled to maintain staffing levels amid voluntary resignations. Employment has now declined in five of the past six months.
Demand, however, showed resilience. New orders rose slightly for the first time in three months, with the seasonally adjusted index moving just above the 50-point threshold, indicating broadly stable new work rather than a significant recovery.
Some of the surveyed manufacturers reported improving demand and increased customer requests, but these gains were offset by muted demand, stronger competition and reduced purchasing power among clients.
