Historical Overview HSBC Indonesia PM

Indonesia'€™s manufacturing activity slowed for the fourth straight month in January to a level that posed more serious threats of unemployment.

HSBC Indonesia Purchasing Managers'€™ Index (PMI), which measures the health of the manufacturing sector, settled at 48.5 in January on falling output and new orders despite edging up from its all-time low level of 47.6 registered in December last year.

A PMI reading below 50 suggests a contraction in the manufacturing sector, while an index above 50 signals expansion.

As the consequence of slower manufacturing activity, manufacturers reported job losses for the sixth month in January, marking the longest period of job shedding in the survey'€™s 46-month record.

'€œNevertheless there are signs that, while manufacturing sector conditions are likely to remain soft in the coming months, the sector is stabilizing,'€ Su Sian Lim, HSBC economist for ASEAN, said in a research note on Monday.

Falling oil prices that might continue in coming months could give a boost to the manufacturing sector, she noted.

The manufacturing industry has been a key contributor to economic expansion in Southeast Asia'€™s biggest economy. However, its share now represents only 23.7 percent of the country'€™s gross domestic product (GDP), much lower than 30 percent recorded before the 1998 financial crisis, causing stagnation in labor absorption.

As of August last year, the sector employed only 15.39 million people, accounting for 13 percent of the domestic workforce, relatively unchanged from more than a decade ago.

Analysts have warned that manufacturing activity may stay soft this year as domestic consumption could remain low on weaker purchasing power of people and doused overseas demand.

Separately, the Central Statistics Agency (BPS) reported that the non-oil and gas manufacturing industry grew by 4.74 percent throughout 2014, much lower than 6.01 percent in 2013 although slightly higher than 4.12 percent a year earlier.

'€œThe expansion of the domestic industry is in line with the rise in exports of industrial goods,'€ BPS chief Suryamin said in a press conference at his office.

Exports of manufactured goods rose mildly by 3.8 percent to US$117.33 billion in the past year, outpacing shipments of agricultural produce and mining commodities that respectively increased by 1.01 percent to $5.77 billion and declined by 26.67 percent to $22.86 billion.

Large and medium industries expanded by 4.74 percent on an annual basis from 2013, supported by growth seen in the food and beverage industry (10.56 percent), pharmaceutical, chemical medicine and traditional herbal remedies industry (9.92 percent) and electrical tool industry (9.84 percent).

Meanwhile, micro and small industries rose slightly higher at 4.91 percent, driven largely by wider production in the electrical tool industry (23.44 percent), machine and tool repair and installation services (20.52 percent) and paper industry (17.96 percent).

The government has set an ambitious target of tripling non-oil and gas exports in 2019 from last year when the sector'€™s exports reached $145.96 billion, which industry officials estimate will require Rp 1.09 quadrillion ($86.63 billion) in direct investment.

Popular

Iran says won't reopen Hormuz if US upholds naval blockade

Sovereignty concerns loom over new security pact with US

Immigration foils unauthorized haj attempt by 13 pilgrims