Indonesia: Manufacturing PMI improves in May
June 5, 2018
Conditions in Indonesia’s manufacturing sector improved in May, according to the IHS Markit and Nikkei manufacturing Purchasing Managers’ Index (PMI), which ticked up from 51.6 in April to 51.7 in May, the best reading since June 2016. With the increase, the PMI rose further above the 50-point threshold that indicates an improvement in business conditions.
May’s print was underpinned by sharp increases in output and new orders. Output expanded at one of the fastest paces in the survey’s history, driven by higher volumes of new domestic orders, underscoring strong economic activity at home. In contrast, new export orders declined in May for the sixth consecutive month. Indonesian manufacturers did not face capacity constraints, and backlogs of work declined in May despite higher new orders. Firms also reduced staffing levels, albeit marginally, as they had sufficient resources to meet demand volumes. Regarding price developments, input prices rose at the fastest pace since October 2015 on a weaker currency; firms hiked output prices as a result.
Commenting on the business confidence component of the index, Economist Aashna Dodhia from IHS Markit said:
“Looking ahead, expectations of further improvements in demand bolstered business confidence towards the 12-month outlook to a three-month high.”
Indonesia Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment rising 6.3% in 2018, which is unchanged from last month’s estimate. For 2019, the panel expects fixed investment to increase 6.5%.