Indonesia: Manufacturing PMI records worst reading since June 2020 in July
The IHS Markit Manufacturing Purchasing Managers’ Index (PMI) came in at 40.1 in July, down from June’s 53.5. July’s result marked the worst performance since June 2020. Consequently, the index dropped below the 50-threshold, signaling a deterioration in business conditions from the previous month. The decline was mainly driven by new restrictions (known as PPKM Level 4) arising from a surge in Covid-19 cases, themselves due to the Delta variant.
July’s drop owed itself to falling manufacturing output and new orders, as well as lower employment levels. Purchasing activity and stocks of inputs also fell. Supply constraints persisted, with rising delivery times; despite a slowdown in demand, backlogged work remained almost unchanged from last month. Such constraints contributed to the fastest rate of input price inflation since February 2014. Despite the poor reading, Indonesian manufacturers became more positive about the outlook for production in the next 12 months.