Indonesia: Manufacturing PMI slips in January
Conditions in Indonesia’s manufacturing sector largely stagnated in January according to the Purchasing Managers’ Index (PMI) released by IHS Markit and Nikkei, with the PMI decreasing from 51.2 in December to 49.9 in January. As a result, the indicator moved marginally below the 50-point threshold that seperates expansion from contraction in the manufacturing sector.
January’s reading was underpinned by a decline in new orders and new exports, and flat output. However, employment increased slightly. On the price front, input and output inflation were mild, supported by the marked appreciation of the rupiah since the back end of 2018. Despite the dip in the overall index, businesses were still optimistic regarding output over the year ahead.
According to Bernard Aw, Principal Economist at IHS Markit, “More worrying was the softening of demand conditions, particularly in the domestic market. New orders fell at the steepest rate in one-and-a-half years. Foreign demand remained weak. The continued surfeit of operating capacity, as indicated by lower backlogs, could adversely impact output in the coming months, particularly if demand doesn’t revive. This in turn could weigh on factory employment. January data pointed to the weakest pace of job creation for seven months.”