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RI PMI data: Factory activity growth slows as overseas demand weakens
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Employees prepare aluminum bars at a PT Inalum factory that produces 225,000 tonnes of aluminum bars a year. (JP/Apriadi Gunawan)
I
ndonesian manufacturers have become less confident about business prospects, partly because of weak export orders, data published on Wednesday by S&P Global suggest.
S&P’s purchasing managers’ index (PMI) for Indonesia’s manufacturing sector dropped from 52.3 in September to 51.5 in October, marking the lowest level since May.
The figure suggests that factory activity was still expanding last month, albeit at a slower pace than before. Readings above 50 signify growth, while those below that threshold point to a drop in production.
The slowdown was attributed to weaker new order growth and reduced export sales. According to a press release issued by S&P, “firms also worked through their backlogs and reduced their headcounts slightly”.
The market intelligence provider, which produces the monthly PMI survey based on a questionnaire sent to hundreds of purchasing managers around the country, added that cost pressure had picked up for Indonesian factories “despite easing supply constraints”.
S&P Global economics associate director Jingyi Pan explained that "further signs of slowdown in growth momentum have manifested, including a second successive slowdown in new order growth and a fresh contraction in new export orders.”
She noted in the press release that business confidence among manufacturers had “slipped further below the series average to signal reduced optimism regarding output over the next 12 months” but saw a silver lining: “The softer rate of selling price inflation is expected to support more muted inflation for the Indonesian economy, however, which bodes well against a backdrop of increased uncertainty.”
