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Indonesia: Manufacturing PMI reflects ongoing deteriorating in sector

June 1, 2015

The manufacturing Purchasing Managers’ Index (PMI) inched up from 46.7 in April to 47.1 in May, according to a release provided by HSBC. Despite the modest increase in May, 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.

May’s figure reflected an eighth straight contraction in both output and new orders. Challenging economic conditions, weak demand and increased competition dragged on production and new orders. New export business fell to a new survey-low amid sluggish global demand. Lower production and new work requirements led manufacturers to reduce their purchasing activity at the fastest rate since the survey began in April 2011, reflecting the extent to which demand has collapsed in recent months. Backlogs of work fell the most in nine months. Employers trimmed their employment levels in May for the 10th consecutive month.

According to HSBC, “the fact that May’s Indonesian Manufacturing PMI recorded slightly higher than in April provides little consolation to the fact that the index continues to indicate worsening business conditions across the sector. There is nothing to suggest that manufacturing will turn the corner and stabilise anytime soon. Manufacturing appears to be acting as an increasing drag on the economy, raising the risk of a deepening contraction of GDP in the second quarter.”

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 May 2015 0

Note: HSBC Indonesia Manufacturing Purchasing Managers’ Index. Readings above 50 indicate an expansion in the manufacturing sector while readings below 50 indicate a contraction.
Source: HSBC and Markit.


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