July 2, 2024
JAKARTA – Indonesia saw its manufacturing purchasing managers’ index (PMI) drop to a 13-month low in June as companies recorded a slower growth rate for both new orders and output.
The PMI by S&P Global report published on Monday, based on a survey of purchasing executives from around 400 manufacturing companies to determine business conditions, showed that Indonesia’s PMI fell 1.4 points to 50.7 in June, the lowest since May 2023.
The June 2024 figure still marked expanding factory activity for the 34th consecutive month, as indicated by scores above the 50-point threshold separating expansion from contraction.
“There was a notable loss of momentum in the Indonesian manufacturing sector in June, with new order growth almost stalling as exports fell for the fourth month running,” Trevor Balchin, economics director at S&P Global Market Intelligence, said in a statement on Monday.
“The outlook is concerning, with the Future Output Index unmoved from May’s level and among the lowest on record,” he said.
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According to the S&P Global report, production grew faster than new orders in June, causing backlogs to fall for the first time since last November. Stock of finished goods also fell for the first time since January, and at the steepest rate since July 2022.
Input stocks also continued to rise, but at the slowest rate since November 2022, with local manufacturers reporting a rise in raw material prices due the rupiah depreciating against the US dollar and higher diesel prices.
The report also noted that lower confidence in future orders constrained employment in June, leaving it relatively unchanged from the previous month.
“The direction [of the index] is pointing to an outright fall in new orders at the start of second half of the year, which would be only the second contraction since the middle of 2021,” Balchin noted.
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The rupiah was trading on Monday at around Rp 16,350 to the US dollar, according to data from global financial portal Investing.com.
While the currency has bounced back from its lowest level of Rp 16,480 per dollar on June 20, it has failed to return above the psychological level of Rp 16,000 per dollar since May.
Nevertheless, Bank Indonesia (BI) said it was confident the rupiah would return to Rp 15,900 per dollar in the long run, banking on the country’s solid economic fundamentals.
The Indonesian Employers Association (Apindo) warned in April that prolonged weakening of the rupiah could force manufacturers to cut production volume as overhead costs rose.
With raw and auxiliary materials making up 70 percent of total imports and capital goods 10 percent, the manufacturing industry is particularly vulnerable to imports.