Indonesia’s manufacturing activity continued to contract in June. It was the ninth consecutive month that the country’s manufacturing sector contracted. The Nikkei/Markit purchasing manager's index (PMI) rose slightly to 47.8 in June 2015 from 47.1 in May, implying that the sector contracted at a slower pace but remained well below the level of 50 that separates contraction from expansion. Contraction continued due to persistent declines in new orders and production. Meanwhile, inflationary pressures (7.26 percent y/y in June) persist.
In the second quarter of 2015, Indonesia’s PMI averaged 47.2, the lowest quarterly reading since the index was started in early 2011. Markit Economist Pollyanna De Lima said that the persistence of a contracting manufacturing industry may be a sign on the wall that the country’s GDP growth is likely to have slowed further in the second quarter of 2015. In the first quarter, Indonesia’s economy grew at a six-year low of 4.71 percent (y/y).