December 4, 2025
JAKARTA – Indonesia’s manufacturing sector continued to improve for the fourth month in a row, supported by strong domestic demand as exports declined to their weakest point in years, weighing on the industry amid a monthslong slump.
Based on a survey of purchasing executives from around 400 manufacturing companies across Indonesia, the Purchasing Managers’ Index (PMI) report published by S&P Global on Monday shows the index rising to 53.3 in November, up from 51.2 the preceding month.
This marks the fourth consecutive month in which the index has remained above the 50-point threshold that separates expansion from contraction.
S&P Global Market Intelligence economist Usamah Bhatti wrote in the report that the headline PMI signified “a positive month for the health of the Indonesian manufacturing economy”. He said renewed expansion in production was occurring at the quickest pace since August 2023.
“Firms responded to higher workloads by raising purchasing levels and employment, while also recording signs of pressure on capacity with the most pronounced increase in backlogs since September 2021,” Bhatti said.
The report noted that the domestic economy was the principal driver of this year’s demand, as export orders have been consistently declining and reached “the most pronounced” weakening in the past two years in November.
Statistics Indonesia (BPS) revealed on Monday that exports slowed by 2.31 percent year-on-year (yoy) in October due to dropping coal shipments, one of Indonesia’s key export commodities, which has seen significant price weakening throughout the year.
The PMI report added that November saw a renewed uptick in production for the first time in three months, growing at the fastest pace since February. The higher production prompted manufacturers to increase inventories of finished goods to prepare for sustained demand.
Firms hired more workers for the fourth consecutive month to meet rising capacity needs, though November’s hiring pace “softened slightly” from October.
Respondents also reported higher production requirements, with purchasing activity rising “at a solid pace” last month.
“Concurrently, anecdotal evidence suggested that firms looked to maintain sufficient stocks of inputs for production, leading to the strongest accumulation in stocks of purchases in eight months,” the report stated.
Read also: Manufacturing PMI ticks up on rising new orders
However, the increase was accompanied by additional strains on suppliers due to road congestion and poor weather, resulting in the worst delivery delays since October 2021.
Producers also faced higher input prices, as inflation expectations reached their highest level since February. Rising costs were linked to more expensive raw materials and exchange rate fluctuations.
“Looking ahead, Indonesian manufacturers signaled optimism regarding the outlook for the coming year. The degree of confidence was robust but eased sharply from October and was among the weakest levels recorded since this series began in April 2012,” the report added.
Read also: RI manufacturing back in expansion after monthslong slump
Permata Bank chief economist Josua Pardede told The Jakarta Post on Monday that October’s export weakening coincided with strong imports of raw materials and capital goods, suggesting that “manufacturing growth now relies more on domestic spending power amid a weakening global economy and increasing trade barriers”.
Despite the expansion, Josua warned of lingering “structural vulnerabilities” and cost pressures that “warrant caution”, citing logistical and weather-related disruptions that could hamper production if they persist.
He said the industry remained optimistic for the coming year, though expectations were “weakening”, as domestic demand and government spending continue to be the main pillars of growth during global economic softness and exchange rate volatility.
“In this context, interest rate policy has to be undertaken carefully, while fiscal policy and structural reforms must focus on strengthening purchasing power, upgrading logistical infrastructure, reducing production costs and increasing export competitiveness,” he added.
Ashalia Fitri Yuliana, an analyst at Samuel Sekuritas Indonesia, wrote in an analysis on Monday that growth remains domestically driven but externally uneven, capacity is tightening while logistics are strained and firms are optimistic yet increasingly cautious, producing caveats to the expansion.
“While the sector is clearly expanding, the tone beneath the headline is nuanced […] The moderation in business confidence suggests that companies recognize both the strength of underlying demand and the fragility of operating conditions,” Ashalia said.