Home Industry Indonesia’s Manufacturing Activity Index Increases Slightly

Indonesia’s Manufacturing Activity Index Increases Slightly

Business people continue to look positively at future conditions even though so far there has not been a significant stretch.

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JAKARTA – Indonesia’s manufacturing activity index in February 2019 rose slightly compared to the previous month. Although in general there has not been a significant stretch, business people still look positively in the future.

Based on the Nikkei Indonesia Manufacturing Purchasing Managers’ Index (PMI) released on Friday (1/3/2019), in February this year, the domestic manufacturing index was at 50.1. This figure rose from the previous month which was in the position of 49.9.

Index data above 50 indicates an increase in all survey variables, while below 50 indicates a decline.

This manufacturing index released every month provides an overview of the performance of the processing industry in a country, which comes from questions about the number of production, new requests, employment, inventory, and delivery time.

Bernard Aw, Principal Economist at IHS Markit, said that in February 2019 the volume of production of the companies surveyed declined and new businesses entered were recorded as quiet.

By looking at the PMI figures in the second month, he estimated that the condition of the processing industry during the first quarter was not very encouraging.

“Weak demand conditions lead to a further decline in job buildup and a burden on production volume in the coming months,” Bernard said.

Meanwhile, inflationary pressure can be handled properly. This, said Bernard, can be seen from the increase in production costs and product prices that only occur in the marginal range and at a slower pace than last year. Strengthening the exchange rate in general is the reason for the slowdown in inflation.

Although production volume has declined, the company recruits more workers making it possible to complete the buildup of jobs.

Unresolved employment rates have declined for 4 consecutive months and are at the fastest pace since December 2017.

Supply chain costs also eased with decreases in production and faster delivery times. Respondents in general are still optimistic about future business estimates. What drives this belief include more product variations, capital investment, and planned business expansion.

Meanwhile, the Nikkei Indonesia Manufacturing PMI is based on survey data held every month. More than 300 manufacturing companies became respondents.

The manufacturing sector surveyed is divided into 8 categories, namely basic metals, chemicals and plastics, electronics and optics, food and beverages, machinery, textiles and apparel, wood and paper processing, and transportation equipment.

Adhi S Lukman, Chairman of the Indonesian Food and Beverage Entrepreneurs Association (Gapmmi), previously stated that demand conditions that were not strong at the beginning of the year were normal in the food and beverage sector.

Requests will be accelerated again in line with the preparation for meeting the needs of the fasting month and the Idul Fitri which arrives in the period May – June this year.

Usually, continued Adhi, preparations were made several months before fasting and Eid. “Purchasing for the preparation of fasting and Eid is usually 3 months before,” explained Adhi.

Chairman of the Indonesian Textile Association (API) Ade Sudrajat said the same thing. He considered the lack of enthusiasm for demand at the beginning of the year as normal. Industry players are also optimistic that industry performance will increase again this year.

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