Manufacturing Activity Update: Indonesia Experiences Deteriorating Conditions
12 August 2019
Manufacturing Activity Update: Indonesia Experiences Deteriorating Conditions
It was not the greatest start of the 3rd quarter for Indonesian manufacturers. In fact, in July 2019, Indonesian manufacturing conditions deteriorated for the first time since January 2019. The IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) fell from a reading of 50.6 in June 2019 to 49.6 in July 2019, below the 50.0 point threshold that separates expansion from contraction.
In other words, Indonesia’s manufacturing activity contracted in July as mild growth of overall new orders, a build-up in stocks of final goods and signs of spare capacity prompted the nation’s manufacturers to cut back on production volumes. This also led to staff numbers being cut at the quickest rate for 19 months. Factories also cut their purchasing activity as well as their input inventories. Meanwhile, input cost inflation was only modest while selling prices were broadly unchanged.
One very interesting piece of information in HIS Markit’s latest report on Indonesia is that – while overall demand conditions remained subdued in July 2019 as indicated by a slight increase in total new orders - new export sales rose at the fastest pace since October 2017.
