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Manufacturing growth comes to abrupt halt, new orders drop
The IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) dropped sharply to a reading of 40.1 in July, indicating the vital sector’s first contraction in nine months.
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Business as usual: Workers assemble Isuzu Traga trucks at an Isuzu factory in East Karawang, West Java, on Aug. 3, 2020. Manufacturing activity slowed abruptly in July 2021 after months of improvement, according to the IHS Markit Indonesia Manufacturing Purchasing Managers’ Index. (JP/Seto Wardhana)
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ontainment measures enforced by the government last month in response to an alarming increase in COVID-19 infections have dampened production and demand and sent manufacturing sector growth back into negative territory, the latest IHS Markit survey shows.
The IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) dropped to 40.1 in July, well below the 50-point mark signifying the threshold between expansion and contraction, in what is thought to be a result of the coronavirus resurgence that compelled the government to restrict travel and business activities.
July’s reading marks a stark decline from 53.5 in June and signals the first contraction for the country’s manufacturing sector in nine months. The rate of decline was the fastest since June 2020, IHS Markit stated in a press release published on Monday.
“The effects of [the increase in virus cases] are twofold, with the resurgence dampening overall economic conditions through demand, production and employment, while also aggravating supply chains and costs for manufacturers,” the statement reads.
Manufacturing output and new orders both shrank at the fastest pace since May 2020, according to the latest data, thereby ending an eight-month growth streak.
The contraction in manufacturing activity comes after the government imposed pandemic-related emergency rules in early July, mainly across Java and Bali, which together account for a major chunk of the country’s GDP.
Read also: Manufacturing recovery in jeopardy as virus curbs hurt businesses
