Indonesia: Manufacturing PMI falls to record-low amid fuel price hike and weak external demand
December 1, 2014
The manufacturing Purchasing Managers’ Index (PMI) decreased from 49.2 October to 48.0 in November, according to a release provided by HSBC. The result marked the lowest level on record. Moreover, the index is now further below the 50-threshold, which indicates contraction in the manufacturing sector. The government’s decision in mid-November to hike prices of subsidized fuel was an important factor driving the decline.
November’s figure reflected strong contractions in output and new orders. Output fell at the fastest rate since January 2012, amid reports of falling demand and higher fuel prices. New orders contracted at the sharpest rate since April 2011, with softening external demand and depreciation of the rupiah dragging down new export business in particular. Moreover, the decrease in production and demand led to a fourth consecutive fall in employment. The fuel price hike also caused input prices to increase the most in nine months.
According to HSBC, “the fuel price hike in November was a factor behind the record-low PMI reading. But weak external demand was also a key driver, with the new export orders index at a 13-month low.”
Author: Carl Kelly, Economist