Indonesia Purchasing Managers’ Index Soars to 53.7 Points

Indonesia's Processing/manufacturing Industry

The national economic recovery has shown significant good progress. One of the contributors is the manufacturing sector. This can be seen in the Indonesia Purchasing Managers’ Index (PMI).

Based on data from IHS Markit, Indonesia’s Purchasing Managers’ Index (PMI) in September reached 53.7, up from 51.7 in August.

This is the PMI position above the 50 levels for the thirteenth straight month. In addition, IHS Markit noted this was the fastest rate of expansion in eight months and the most solid overall.

Economist at S&P Global Market Intelligence, Laura Denman, said the latest survey data is consistent with the improvement in Indonesia’s manufacturing health since last January.

“Stronger demand conditions helped to drive the sharpest increase in new orders in nearly a year,” Laura said.

Laura added that the increase in demand also affected purchasing activity, which increased at the sharpest pace in eight months.

The improvement in demand also led to a stronger increase in production, as well as employment. On the other hand, IHS Markit sees a softening of inflationary pressures.

“Input costs and selling price inflation eased to 20 and 15-month lows, respectively,” Laura said.

Although Indonesian manufacturing firms are generally confident that output will increase over the next year, IHS Markit nonetheless sees the positive sentiment level drop to a three-month low and remain below historical trends.

The IHS survey also showed several companies expressed concern over inflation which is currently pressuring the business world.

On the other hand, Finance Minister Sri Mulyani Indrawati said that Indonesia’s manufacturing sector was still expanding. This happened when the manufacturing sector in several countries actually experienced a weakening.

The Global Purchasing Managers Index (PMI) as of August 2022 fell from 51.5 to 50.3. Meanwhile, of the G20 and ASEAN-6 countries, only 24% whose PMI is still accelerating or manufacturing is experiencing expansion.

“Of the G20 and ASEAN-6 countries, only 24 percent of which PMI is still accelerating, or manufacturing is still expanding and increasing compared to the previous month. This includes Indonesia, Thailand, the Philippines, Russia, Vietnam, and Saudi Arabia,” said Sri in the presentation of our APBN, Monday (26/9/2022).

For information, the PMI is an index that shows the direction of economic trends in the manufacturing sector. PMI provides information about the condition of the manufacturing business, which can be considered by companies or investors in making decisions.

A PMI above 50 indicates the manufacturing sector is experiencing expansion or progress. A PMI below 50 indicates the manufacturing sector is contracting or decelerating. For example, there is a decrease in consumer demand.