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Layoff risks loom as manufacturing PMI slips further
Indonesia’s manufacturing purchasing managers' index (PMI) points to further contraction in factory activity in August on the back of diminishing sales, forcing some firms to reduce their workforces despite their hopes for the coming year.
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Oodles of noodles: Workers produce noodles on Jan. 14, 2023, at a factory in Surabaya, East Java.
(AFP/Juni Kriswanto )
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ndonesian manufacturing activity has contracted further on the back of diminishing sales, forcing some firms to shed jobs despite the sector’s overall upbeat outlook for the coming year.
Published by S&P Global on Monday, Indonesia’s manufacturing purchasing managers' index (PMI) dropped to 48.9 in August from a reading of 49.3 in July.
This marks the second month in row for the key gauge of factory activity to remain in negative territory, or below the 50-point threshold that separates expansion from contraction. The last time the headline index for Indonesia was in contraction territory was August 2021.
The report is based on a survey of purchasing executives from around 400 manufacturing companies across Indonesia to determine business conditions.
"The downturn in Indonesia's manufacturing industry intensified during August, characterized by the steepest falls in both new orders and output for three years,” S&P Global Market Intelligence economist Paul Smith commented in the report.
He went on to say that firms were responding to the deteriorating market environment by cutting their workforces, but “many” respondents “were keen to note these were temporary in nature”, reflecting confidence that conditions would improve.
Bank Central Asia (BCA) chief economist David Sumual told The Jakarta Post on Monday that the reduction in the manufacturing workforce could worsen if the country failed to attract more investment to the sector.
