S&P Global reported that Indonesia’s Manufacturing Purchasing Managers’ Index (PMI) stood at an expansionary level of 52.2 in December 2023, representing a 0.5-point increase from November 2023, where it was at 51.7. The achievement of a PMI at the end of 2023 signifies the rapid pace of Indonesia’s manufacturing sector in the last three months, continuing the trend of manufacturing expansion for the past 28 months.
Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, mentioned that the December PMI level was boosted by upcoming new demand, with both new orders and output experiencing solid expansion.
“This strengthens purchasing activities and drives sustained increases in employment across the production of goods, supporting further improvement in economic activity,” stated Jingyi Pan on Tuesday).
According to Pan, future manufacturing PMI indicators, including the order backlog index and production output for the next few months, are also expected to show positive trends. This is due to increased business confidence reaching its second-highest position in a year, while a slight accumulation of order backlogs indicates an improvement in demand conditions.
“Lastly, although the inflation rate rose in December, it remains below the average, indicating no significant pricing pressure,” she added. The majority of incoming orders were dominated by foreign sources, supporting faster production growth and refreshing the accumulation of new order backlogs. On the other hand, the number of employees also increased in line with purchasing activities, driven by improving optimism among manufacturers regarding demand projections for the upcoming year, although the job market growth rate remains marginal.
Overall sentiment in Indonesia’s manufacturing sector improved again in the latest survey period, as companies continue to grow, anticipating continuous sales expansion in 2024. In terms of prices, the overall production cost increased again in December, extending the current inflation period to over four years. According to panel members, increases in raw material prices, shipping, and exchange rate conversion costs contributed to the recent uptick in production costs. At the same time, Indonesian manufacturing companies slightly raised their selling prices in December to cover costs.
PMI, or Purchasing Managers’s Index, is a key economic indicator that provides insights into the manufacturing sector’s health. A reading above 50 indicates expansion, while below 50 suggests contraction. In the case of Indonesia’s December 2023 PMI of 52.2, it signals continued growth and positive momentum in the manufacturing industry. The increase from the previous month’s reading indicates an even stronger pace of expansion, driven by rising demand and output. The outlook for the future, as indicated by the order backlog and production output indices, suggests a positive trend and confidence among manufacturers. The fact that the inflation rate is rising but still below average implies that there is inflationary pressure but not at alarming levels. Overall, the data points towards a robust and optimistic manufacturing sector in Indonesia.
