Indonesia’s Manufacturing Sector Accelerates Expansion in March

manufacturing output

Improved demand conditions led to higher production in Indonesia’s manufacturing as ASEAN’s biggest economy saw in March its manufacturing sector grow at the fastest rate since last September, according to the latest S&P Global Indonesia Manufacturing Purchasing Managers’ Index (PMI). 

The headline index posted a 51.9 reading in March, up from 51.2 in February. This extended the current sequence of improving manufacturing conditions to 19 months, while the pace of growth in March was the fastest since September 2022, S&P Global said in a report on 3 April.

“Demand for Indonesian manufactured goods increased at the fastest rate in six months in March, reflecting better underlying demand conditions and a widening of manufacturers’ customer bases. Although new export orders declined amidst weaker market conditions abroad, the pace of reduction moderated from February and was only mild,” said S&P Global.

The higher overall demand resulted in the steepest growth in manufacturing output in March in six months. Indonesian manufacturers also raised workforce levels for a second month running in March, thanks to an increase in new order intake.

Indonesia manufacturing firms also saw in March increased business confidence from February, due to improved demand conditions, although the business confidence level stayed below the series average, S&P Global said.

“Strong demand growth led to higher production levels among Indonesian manufacturers, also fuelling an expansion in workforce numbers and purchasing activity,” Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, said.

“Supply pressures became more manageable as suppliers’ delivery times shortened while input price inflation remained below the 12-month average, embodying the effectiveness of earlier rate increases. At the same time, selling prices increased at the slowest rate since November 2020 which bodes well for continued easing of overall inflationary pressures in Indonesia.”