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Recovery process of manufacturing sector after PPKM Darurat
According to Statistics Indonesia (BPS) data, the manufacturing industry contracted by 1.38 percent year-on-year (yoy) in the first quarter of this year. Nevertheless, some industrial subsectors continued to grow.
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Workers assemble Isuzu Traga trucks at an Isuzu factory in East Karawang, West Java, on Aug. 3, 2020. Manufacturing has remained the backbone of Indonesia’s economy during the pandemic. (JP/Seto Wardhana)
T
he manufacturing industry’s performance increased in the second quarter of 2021, which was its expansion phase, as reflected in the Bank Indonesia Prompt Manufacturing Index (PMI-BI) of 51.45 percent, up from 50.01 percent in the first quarter and 28.55 percent in the second quarter of last year.
The index increase occurred in almost all components, especially production volume and total order volume, which were in the expansion phase. By subsector, increased performances in the second quarter of 2021 were food, beverage and tobacco; paper and printed goods; as well as fertilizer, chemical and rubber goods, which were already in the expansion phase. These were driven by increased demand during Ramadan and Idul Fitri.
Meanwhile, the IHS Markit Indonesian Manufacturing Purchasing Managers' Index (PMI) was recorded at 53.5 in June amid an increase in national COVID-19 cases. This figure was lower than the record seen in May, which was 55.3. The lower Indonesian Manufacturing PMI in June indicated a decrease in output, demand and purchases from the previous month, but it was still at the expansion level.
According to Statistics Indonesia (BPS) data, the manufacturing industry contracted by 1.38 percent year-on-year (yoy) in the first quarter of this year. Nevertheless, some industrial subsectors continued to grow, namely food and beverages, which grew by 2.45 percent, chemical and pharmacy (11.46 percent), basic metal (7.71 percent), machinery equipment (3.22 percent) and furniture (8.04 percent). The increase in these subsectors’ growth is in line with the PMI-BI. At last, the manufacturing industry sector continues to show positive performance.
Due to the implementation of the government’s emergency public activity restrictions (PPKM Darurat) on July 3-20 and the policy’s planned extension, the Manufacturing Index is predicted to experience another slowdown. This is in line with BI’s forecast that in the third quarter, the PMI-BI would be at 49.89 percent, lower than the achievement in the second quarter.
The lower PMI-BI projection is due to a decrease in the majority of its components, particularly production volume, volume of finished goods and total number of workers who were in this contraction phase. The subsectors that may slow down include paper and printed goods; food, beverage and tobacco; and transport and machinery equipment.
We also project that the future of the Manufacturing Index will depend on the surge of COVID-19 cases. We see that the manufacturing sector’s performance is determined by the effectiveness of the efforts to reduce daily COVID-19 cases.
