Expansion in Indonesia’s Manufacturing Sector Continues

The manufacturing sector in ASEAN’s biggest economy, Indonesia, continued its expansion in February and business confidence in the industry also increased last month, the S&P Global Indonesia Manufacturing Purchasing Manager’s Index (PMI) showed in early March. 

The headline seasonally adjusted S&P Global Indonesia Manufacturing PMI fell slightly to 52.7 in February, down from 52.9 in January, signalling a sustained improvement in manufacturing sector conditions, even though the expansion was at a slightly slower pace than in the previous month. The February reading of yet another expansion extended the current period of expansion to two and a half years, S&P Global said.

The continued rise in Indonesia’s manufacturing was driven by increased new work intakes, with improvements in underlying demand conditions helping to lift new orders for the ninth successive month, the survey of purchasing managers in a panel of around 400 manufacturers found.

Purchasing activity increased at a solid clip, in line with rising new work inflows and higher production. Stocks of finished goods expanded for the first time since last October as firms replenished inventories amid rising demand, according to the survey.

Employment levels rose for the third time in the past four months, as Indonesian manufacturers hired additional staff to cope with ongoing workloads and to keep on top of backlogs, which accumulated slightly.

In addition, business sentiment improved from January, and Indonesian firms remained positive in February as the manufacturing sector remained hopeful that production would rise in the next 12 months.

“Overall, sentiment among Indonesian manufacturers improved in February, which alongside other forward looking indicators such as new orders, suggest that we will continue to see output expanding in the near-term,” said Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence.