Indonesia: Manufacturing PMI rises in April
Conditions in Indonesia’s manufacturing sector improved in April, according to the IHS Markit and Nikkei manufacturing Purchasing Managers’ Index (PMI), which rose from 50.7 in March to 51.6, the best reading since June 2016. With the increase, the PMI was further above the 50-point threshold that indicates an improvement in business conditions.
April’s print reflected an increase in manufacturing output and new work. Growth in new orders reached its sharpest expansion in almost two years; it was driven solely by domestic demand, as volumes of foreign new work declined. Higher new orders resulted in higher purchasing of inputs and an increase in pre-production inventories. Despite higher demand, manufacturers did not face capacity constraints, and backlogs of work declined. Regarding price developments, input costs rose because of a strong USD and a weak rupiah, as well as higher prices for commodities. This resulted in higher output prices for clients.
Commenting on the business confidence component of the index, Economist Aashna Dodhia from IHS Markit said:
“Looking ahead, there was a note of caution, as business confidence moderated to the lowest level seen since the end of 2012. The dip in optimism partly reflected concerns of a potential market slowdown in the year ahead. At the same time, IHS Markit anticipates that widening interest rate differentials will lead to a further depreciation of the rupiah this year.”