T

he country'€™s manufacturing activity continued to weaken for the seventh straight month in April, with business orders from overseas falling at a fast pace, according to a recent survey.

HSBC Indonesia'€™s Purchasing Managers Index (PMI), which indicates the health of the manufacturing sector, stayed at a low level of 46.7 in April on declining output, with a decrease in new orders and low new purchases from overseas buyers.

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

New orders from foreign buyers plunged at the sharpest pace in the 49-month survey history, with Indonesian companies reporting slumping demand from its African, Asian and American counterparts, according to the survey released on Monday.

Some of the companies highlighted more challenging competition resulting from cheaper prices offered by Indian and Chinese manufacturers.

The situation forced Indonesian companies to further cut jobs while purchasing level continued to contract.

'€œApril'€™s PMI survey highlights the current fragility of the Indonesian manufacturing sector, with the domestic and export market appearing to be sources of weakness. Despite the weaker rupiah, businesses struggled to price competitively at a global level as the cost of imported raw materials increased,'€ said HSBC economist Pollyanna De Lima in her research note.

'€œCompanies continued to trim employment, buying levels and pre-production inventories, highlighting an expectation that conditions would remain tough in the near future,'€ she added.

Export figures in the first quarter issued by the Central Statistics Agency (BPS) confirmed the survey'€™s finding. Overseas shipments dwindled by 11.67 percent to US$39.13 billion in the January-March period on the back of weak external demand and unfavorable commodity prices.

On the manufacturing front, outbound delivery of machinery and electrical appliances, the third-biggest contributor to non-oil exports after coal and palm oil, declined 12.75 percent to $2.15 billion. Exports of machines and mechanical engines dropped 16 percent to $1.28 billion, while shipments of chemical products plunged 40.3 percent to $649.4 million.

The deterioration in Indonesia'€™s manufacturing sector was also shared by other emerging economies in Asia, such as China and India.

China'€™s PMI index dropped to 48.9, its fastest drop in a year, driven by shrinking new purchase orders-a condition mostly attributed to slumping domestic demand. Similarly, manufacturing activity in India also eased in April to 51.3 from 52.1 in March, although it remains at a healthy level.

The latest measurement in the manufacturing sector also supported another reading on industrial growth during the first quarter revealed by the BPS on the same day.

Large and medium industries as well as micro and small industries expanded below expectation, a sign that the overall manufacturing industry is struggling not only with dousing demand from abroad but also from domestic buyers.

This puts new pressure on the government to achieve its target of 6.1 percent growth in the non-oil manufacturing industry.

Large and medium industries grew 5.05 percent in the initial quarter from last year, driven by higher output of non-machinery metal goods (10.13 percent), electronic equipment (10.1 percent) and chemicals (9.75 percent). Slowdown was seen in the production of paper and paper products (4.04 percent), rubber and plastics (3.94 percent) and garment (3 percent).

Meanwhile, micro and small industries posted stronger growth as they expanded slightly higher at 5.65 percent, supported by the wider output of paper (25.32 percent), beverages (20.14 percent) and machine and equipment installation (16.11 percent). The slowest pace of expansion occurred in the manufacturing of tobacco (58.34 percent), rubber and plastics (7.7 percent), and computer, electronics and optics (6.87 percent).