Manufacturing Sector in Indonesia Shows Strong Growth and Expansion in Q2 2023

Indonesia's Processing/manufacturing Industry

Bank Indonesia (BI) has reported an encouraging development in the Performance of the Manufacturing Industry during the second quarter of 2023, indicating a phase of expansion. This positive trend is evident in the second-quarter PMI-BI (Purchasing Managers’ Index) which recorded a value of 52.39%, surpassing the previous quarter’s figure of 50.75%.

According to Erwin Haryono, the Head of Communications Department of BI, this growth can be attributed to various factors. He stated, “The improvement is observed across all components that contribute to the PMI-BI, particularly in Production Volume, Order Volume, and Finished Goods Inventory Volume, all of which are experiencing expansion (index>50).” This upward trajectory in the manufacturing sector is a positive indicator for economic progress.

Analyzing the data further based on Sub-Sectors, it is evident that most sub-sectors have witnessed improvements. The highest index values were recorded in the Leather, Leather Goods, and Footwear Industry, followed by the Machinery and Equipment Industry, Non-Metallic Mineral Goods Industry, and the Chemical, Pharmaceutical, and Traditional Medicine Industry. These sectors have played a significant role in driving the overall growth of the manufacturing industry.

Erwin further emphasized that the positive performance of the PMI-BI aligns with the findings of the Business Activity Survey (SKDU) conducted by Bank Indonesia, indicating a rise in business activities within the Manufacturing Industry.

The survey showed a substantial increase in the Net Balance, reaching a value of 2.21%. This suggests that the manufacturing sector is experiencing a favorable business environment, leading to increased productivity and economic growth.

Looking ahead, the third quarter of 2023 is projected to sustain the upward trajectory of the Manufacturing Industry’s performance. The PMI index is expected to reach 53.53%, surpassing the previous quarter’s figure of 52.39%. This growth forecast indicates the industry’s resilience and its ability to adapt to changing market dynamics.

Analyzing the components that contribute to the PMI index, it is anticipated that nearly all aspects will experience positive growth and remain in the expansion phase. Notable areas of improvement include Production Volume, Speed of Receiving Input Goods, and Finished Goods Inventory Volume. These indicators highlight the robustness of the manufacturing sector and its potential to contribute significantly to the economy.

Moreover, the positive outlook extends to the various Sub-Sectors within the Manufacturing Industry. The Machinery and Equipment Industry exhibits the highest index value, followed by the Tobacco Processing Industry and the Basic Metal Industry. This growth across sub-sectors reflects a broad-based expansion in manufacturing activities, signaling a positive economic outlook.

As Bank Indonesia’s report indicates, the projected increase in production volume to 57.70% is attributed to both seasonal factors and enhanced storage capacities.

These factors are expected to sustain the growing demand for manufactured goods, further bolstering the manufacturing sector’s contribution to the overall economy.