Indonesia: Manufacturing PMI
July 3, 2018
Conditions in Indonesia’s manufacturing sector deteriorated in June, according to the IHS Markit and Nikkei manufacturing Purchasing Managers’ Index (PMI), which dropped from May’s 11-month high of 51.7 to 50.3 in June. Despite the drop, the PMI remains above the 50-point threshold that indicates an improvement in business conditions.
June’s print reflected a soft expansion in output and new orders. Output grew at the weakest pace since March due to a slower increase in new orders. In turn, new export orders declined in June for the seventh consecutive month, highlighting weak demand from overseas markets. Backlogs of works declined despite higher production requirements as firms increased staffing levels for the first time in three months. Regarding price developments, output prices rose as firms passed on higher input costs to clients.
Commenting on the business confidence component of the index, Economist Aashna Dodhia from IHS Markit said:
“[The] latest data indicate that the recent interest rate hikes by Bank Indonesia to protect the rupiah appeared to have hindered consumption. This suggests it will be challenging for policy makers to ensure financial stability without compromising economic growth over the coming months. Notably, business sentiment eased to the weakest since October 2012 at the end of the second quarter.”