Indonesia: Manufacturing PMI remains in contraction territory in January
February 2, 2015
The manufacturing Purchasing Managers’ Index (PMI) ticked up from 47.6 in December to 48.5 in January, according to a release provided by HSBC. December’s result had marked the lowest level on record. Despite the improvement, the index is still below the 50-threshold, which indicates contraction in the manufacturing sector.
January’s figure reflected a fourth straight contraction in both output and new orders. New orders contracted at a notably sharp rate, with a lack of international demand dragging down new export business in particular. Moreover, the decrease in production and demand led to a sixth consecutive fall in employment. The recent fuel price hike and a depreciating rupiah also caused input prices to remain well above average.
According to HSBC, “manufacturing activity has started the year on a soft note, not surprising considering that the PMI has generally been weakening since August 2014. Weak external demand continues to pose the largest drag, with the new export orders’ sub-component falling to a record low in January. Nevertheless, there are still signs that, while manufacturing sector conditions are likely to remain soft in the coming months, the sector is stabilizing.”
Author: Carl Kelly, Economist