Indonesia: Manufacturing PMI falls in May, remains upbeat
The S&P Global Indonesia Manufacturing Purchasing Managers’ Index (PMI) fell to 52.1 in May from 52.9 in April. As a result, the index remained above the 50.0 no-change threshold but signaled a softer improvement in manufacturing-sector operating conditions compared to the previous month.
The moderation in the PMI was primarily due to slower expansions in both output and new orders, but they both remained above their respective long-term trend levels. Strong market demand, largely domestic-led, supported the sector’s growth, as new export orders declined for the third consecutive month, reflecting ongoing weakness in global manufacturing demand. This led to the lowest overall rise in new orders in six months. Manufacturers raised their production faster than new orders, pushing up inventories, with stocks of finished goods rising at the strongest pace in 16 months. In addition, employment levels decreased slightly due to cautious hiring practices amid some uncertainty in the outlook. Meanwhile, the purchasing activities of firms continued to grow in response to current production needs and efforts to replenish inventories.
Meanwhile, firms faced a pickup in input cost inflation, driven by a broad-based rise in input prices and unfavorable exchange rate movements. Despite this, market pressures and discounting resulted in only a modest rise in output charges—the lowest since last October. Business sentiment fell to its lowest level since March 2020, amid concerns over potential softening in market demand over the next 12 months.