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Indonesia: Manufacturing PMI holds in contractionary territory despite modest gain in August

September 1, 2015

The manufacturing Purchasing Managers’ Index (PMI) inched up from 47.3 in July to 48.4 in August, according to a release provided by Nikkei. The result continues to signal deteriorating conditions in the manufacturing sector. The index has been below the 50-threshold, which indicates contraction in the manufacturing sector, since September of last year.

August’s figure signaled the 11th straight contraction in both output and new orders, although both declined at a softer pace than in previous months. The fragile economic environment and weak global demand, particularly in Asia, dragged on production and new orders. Lower production and new work requirements led manufacturers to reduce their input purchasing activity in August for a seventh consecutive month. The depreciating rupiah is also leading to higher prices for imported inputs. Moreover, since the weaker currency has not led an increase in foreign demand, manufacturers are unable to pass on costs. Employers also trimmed their employment levels in August.

According to Nikkei, “business conditions across Indonesia remained bleak in August, with PMI data highlighting further declines in output, new orders and employment. Encouragingly, rates of reduction moderated in the latest month, suggesting that we may see a rebound in coming months.”

FocusEconomics Consensus Forecast panelists see manufacturing rising 5.3% in 2015, which is down 0.2 percentage points from the previous month’s estimate. For 2016, the panel expects manufacturing to increase 5.8%.


Author:, Economist

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Indonesia PMI August 2015

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 Markit.


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