Indonesia PMI July 2016


Manufacturing PMI falls into contractionary territory in July

The manufacturing Purchasing Managers’ Index (PMI) fell from 51.9 in June to 48.4 in July, according to a release provided by Nikkei and IHS Markit. The figure marked a seven-month-low. As a result, the index is now below the 50-threshold, which indicates a contraction in the manufacturing sector.

July’s decrease came on the back of a fall in new orders, which decreased for the first time in five months. In addition, job losses and reduced buying levels were recorded among manufactures. Meanwhile, inflationary pressures eased. IHS Markit analysts commented that, “Indonesia’s manufacturing sector is back in reverse gear, with operating conditions deteriorating at the quickest pace in 2016 so far. […] This widespread weakness will be unwelcome to policymakers as survey data show no improvement in economic conditions in spite of a 75 basis points cut to the benchmark rate between January and July. Nevertheless, it is not all doom and gloom for Indonesia’s economy as a lack of inflationary pressure provides the BI with room for further rate cuts later in the year.”

FocusEconomics Consensus Forecast panelists see manufacturing rising 4.4% in 2016, which is up 0.1 percentage points from the previous month’s estimate. For 2017, the panel expects manufacturing to increase 4.8%.

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Indonesia PMI Chart

Indonesia PMI July 2016 0

Note: Nikkei Indonesia Manufacturing Purchasing Managers’ Index. Readings above 50 indicate an expansion in the manufacturing sector while readings below 50 indicate a contraction.
Source: Nikkei and IHS Markit.

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