Expansion in Indonesia’s Manufacturing Sector Accelerates

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The manufacturing sector in Indonesia further expanded in June, with the pace accelerating amid a fresh rise in demand, according to the latest S&P Global Indonesia Manufacturing Purchasing Manager’s Index™ (PMI). 

The headline seasonally adjusted PMI in ASEAN’s largest economy, Indonesia, increased to 52.5 in June from 50.3 in May, signalling another improvement in the manufacturing sector, for a 22nd month in a row, S&P Global said on 3 July.

The June expansion in manufacturing was among the fastest seen over the past year and a half and strong overall, it added.

Production growth in the Indonesia manufacturing sector picked up pace. Backlogs also increased although manufacturing firms acquired inputs and staff at quicker rates.

Despite the additional pressure on supply chains from rising new orders and output, cost inflation further moderated and factory gate prices declined for the first time in 32 months.

Overall sentiment among Indonesian manufacturers also improved in June, with the level of business confidence edging up to the highest since April 2023, thanks to hopes of further improvements in business conditions and sales.

“Growth momentum across Indonesia’s manufacturing sector re-accelerated in June, according to the latest S&P Global PMI data,” said Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence.

“While supply conditions worsened marginally, cost pressures continued to recede and charges fell for the first time since late 2020. This reinforces Bank Indonesia’s view that the monetary policy tightening cycle is now over, with weakening inflationary pressure across the goods producing sector,” the economist said.

“It will be important to see demand, especially external demand, rise to inject greater confidence among manufacturers,” Pan added.