Indonesia: Manufacturing PMI swings from record high to contraction territory in August
September 1, 2014
The manufacturing Purchasing Managers’ Index (PMI) fell from 52.7 in July to 49.5 in August, according to a release provided by HSBC. This is the lowest result that has been recorded since August of last year, and the index is now below the 50-threshold, which indicates contraction in the manufacturing sector.
August’s figure reflects a deterioration in terms of output and new orders. Output fell for the first time since April and at the quickest rate in a year, while new orders declined for the first time after 10 months of expansion. Export orders fell for a third consecutive month. Due to falling production and demand, manufacturers reduced their purchasing activity for the first time in a year. Despite these declines, stocks of inventories grew for a second straight month as manufacturers anticipate future demand growth. Meanwhile, the level of employment was down slightly after two consecutive months of job creation.
According to HSBC, “the deterioration in manufacturing sector conditions in August is surprising, particularly in light of how strong the PMI had been in the prior three months. But the contraction in PMI was only marginal, while stocks of finished goods rose in anticipation of improvements in demand. This suggests that the softening in the August PMI may be a temporary lull.”
Author: Carl Kelly, Economist