Factory activity hit another record high in April, with Indonesian businesses benefiting from easing supply chain disruptions and an uptick in global trade.

The Indonesia manufacturing Purchasing Managers’ Index (PMI), which gauges factory activity based on a monthly survey of 400 local manufacturers, increased to 54.6 in April from 53.2 in March, information provider IHS Markit said in a press release on Monday.

A PMI above 50 indicates expansion, while a PMI below 50 indicates contraction.

The latest reading marked sustained expansion over the past six months and a new high for the second consecutive month since the survey began in 2011. IHS Markit also recorded unprecedented growth rates in output, new orders and purchases.

“Indonesian manufacturing production continued to ramp up in April amid super strong expansions of new orders,” IHS Markit economics director Andrew Harker said in the release.

Read also: Indonesia’s manufacturing PMI hits 10 year-high in March

The manufacturing PMI often anticipates Indonesia’s economic growth, since the sector accounts for nearly one-fifth of gross domestic product (GDP).

With the government pinning its recovery hopes partly on robust expansion in manufacturing, Indonesia’s GDP is forecast to contract between 1 percent and 0.1 percent in the January-March period this year, much smaller than the 2.19 percent contraction in the preceding quarter.

Most major Asian economies recorded above 50 PMI in April. As with Indonesia, Malaysia, India and Taiwan also recording a month-on-month increase in PMI, while Asian economic giant China saw its PMI dip to 51.1 last month from 51.9 in March.

According to IHS Markit, three out of four Indonesian manufacturers foresaw continued expansion in the manufacturing PMI for the coming year, based on expectations of an end to the COVID-19 pandemic and a resulting increase in new orders.

The country’s COVID-19 caseload has been in general decline since February, but the recent detection of more transmissible variants ahead of mudik (exodus) for Idul Fitri has prompted concerns over a possible resurgence like that seen in many other countries.

Read also: Indonesia detects India and South Africa variants

“Encouragingly, total new business was supported by a first rise in exports since the COVID-19 pandemic hit as international demand shows signs of improvement,” said Harker.

Separately, Statistics Indonesia (BPS) data show that the export value of manufactured goods, which accounted for the majority of exports, increased 33.45 percent yoy to US$14.84 billion in March.

Read also: Indonesia’s export hit decade high in March as demand, prices pick up

Despite the unprecedented rise in new orders, IHS Markit noted that manufacturers had yet to hire more workers, leaving employment levels unchanged and backlogs to rise for a second consecutive month.

“Somewhat disappointingly, given the strength of new order growth, firms still appeared reluctant to take on extra staff. Given the subsequent build-up of backlogged work, however, manufacturers will hopefully feel confident enough to start expanding workforce numbers in the months ahead,” said Harker.

Manufacturers also pointed to shortages in raw material supplies as the cause of product price hikes for the sixth consecutive month.

According to the Fiscal Policy Agency (BKF), the government expects the surge in demand, production volume and new business abroad to boost employment levels in the manufacturing sector.

“The government needs to sustain the recovery momentum by maintaining purchasing power and commit to continue supporting businesses,” BKF head Febrio Kacaribu said in a press release on Tuesday.

“The acceleration of the national vaccination program has strengthened the optimism of business players in the manufacturing sector as regards the prospect of faster economic recovery,” he said.

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