Below is a list with tagged columns and company profiles.
Latest Reports Manufacturing
On Wednesday (05/08/2020) Indonesia Investments released the July 2020 edition of its monthly report. In this edition, titled 'A Modest Rebound', we discuss the impact of the COVID-19 crisis on the Indonesian economy, Indonesia's automotive industry, and a range of other topics.
Indonesia’s latest manufacturing data showed that the contraction in manufacturing activity has continued in June 2020, but the level of contraction was not as bad as in the past two months. This is in line with our forecast as the Indonesian government gradually allowed the Indonesian economy to reopen in June 2020.
As expected, Indonesia’s manufacturing activity contracted again in May 2020, albeit at a slightly slower pace. The latest IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (or PMI) rose to a reading of 28.6 points in May 2020, up from the all-time low of 27.5 in April 2020. A reading below 50.0 indicates contraction in the country’s manufacturing activity, while a reading above 50.0 indicates expansion.
Never before did Indonesia’s manufacturing activity collapse so badly in the nine-year history of the IHS Markit Indonesia Manufacturing PMI than in April 2020. The IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) plunged to a reading of 27.5 in April 2020 (from 45.3 in the preceding month). It is not only the steepest fall but also the lowest level of operating conditions ever touched since the survey started back in April 2011.
We were quite surprised to see Indonesia’s latest manufacturing data. From July 2019 to January 2020 Indonesia’s manufacturing activity contracted (seven consecutive months!). Subdued global economic growth and the tariff war between the United States and China were the key reasons for these weak conditions in Indonesia’s manufacturing sector.
As expected, Indonesia experienced a weak start of the year in terms of its manufacturing activity. The IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (or PMI) was recorded at 49.3 in December 2019 (remaining stubbornly below the 50.0 level that separates contraction from expansion in the manufacturing sector). The latest PMI figure is also a slight decline from 49.5 in the preceding month.
For the sixth straight month manufacturing activity in Indonesia remained in the red zone. It therefore was a very disappointing second half of 2019. Moreover, it raises room for concern about Indonesia’s overall economic growth in 2019.
For the fifth straight month manufacturing activity in Indonesia remained in the red zone, implying that the fourth – and last – quarter of 2019 is bound to be a disappointing quarter in terms of manufacturing activity (possibly becoming the weakest quarter in four years). And this is certainly not a good omen for Indonesia’s economic growth in Q4-2019.
Manufacturing activity in Indonesia has been in the red zone throughout the third quarter of 2019. In fact, the performance in Q3-2019 was Indonesia’s weakest performance in terms of manufacturing activity since the last quarter of 2016.
After the ‘false start’ in the third quarter of 2019 when, in July, Indonesia’s manufacturing conditions contracted for the first time since January 2019, there is again some bad news to share. In August 2019 manufacturing conditions in Southeast Asia’s largest economy continued to contract, and even at a more rapid pace than last month.
Latest Columns Manufacturing
The Indonesia rupiah exchange rate appreciated slightly on Tuesday (02/12). By 12:50 pm local Jakarta time, the currency had appreciated 0.03 percent to 12,277 per US dollar according to the Bloomberg Dollar Index. Yesterday, Indonesia’s currency had depreciated to the lowest level since January 2014 after official government data showed that inflation had accelerated sharply, while exports contracted more than expected, implying that the country’s wide current account deficit remains troublesome.
Although the Indonesian rupiah exchange rate appreciated 0.86 percent to IDR 11,995 per US dollar on Friday (27/06) as economic data from China, South Korea and Taiwan sparked optimism that regional growth has picked up, the recent depreciating trend of Indonesia’s currency burdens the country’s manufacturing industry. This industry is still dependent on imports of raw materials, capital goods and auxiliary materials, which are paid using US dollars causing the domestic industry to feel the financial impact of a weaker rupiah.
Indonesia’s HSBC Markit Purchasing Manager’s Index (PMI) showed a reading of 51.1 in April 2014, significantly up from 50.1 in the previous month, meaning that manufacturing activity in Indonesia has grown (a reading above 50.0 indicates expansion, while a reading below 50.0 indicates contraction). In fact, amid improved economic conditions as well as strong demand, manufacturing activity in Southeast Asia’s largest economy expanded at the fastest pace in 11 months.
Although Indonesia is the world's largest archipelago, contains an abundance of commodities and has the world's fourth-largest population, the country's export and import figures are still small compared to the world's leading exporting and importing countries (see table below). There are many - and much smaller - countries that post much more impressive import and export data. In terms of exports, Indonesia is too dependent on commodities (accounting for around 60 percent of all exports) causing problems in times of price downswings.
It seems clear now how market conditions will be until the end of the year. Two important foreign issues - the US Federal Reserve's tapering of quantitative easing (QE3) as well as the US debt ceiling issue which resulted in a shutdown as the Democrats and Republicans failed to come to an agreement on the country's federal budget - and various economic data from Indonesia (inflation and the trade balance) have provided some more insight into the matter. I will discuss each topic one by one below.
HSBC's latest release of the Indonesia Manufacturing PMI did not paint a positive picture as Indonesia's manufacturing activity was reported to have contracted sharply in August 2013. The index declined to a 15-month low amid a contraction of output, new orders and export business. Payroll numbers fell at the fastest rate in the history of the HSBC survey. The August index stood at 48.5, down from 50.7 in July 2013, and marks the fourth consecutive month of decline. A reading below 50.0 indicates a contraction in manufacturing activity.
Rising Asian stock indices from the start of the week have supported Indonesia's main stock index (IHSG) to follow suit on Tuesday (13/08). Despite mixed markets in the United States and Europe, the IHSG grew 1.19 percent to 4,652.40 points. Japan's Nikkei index, which weakened seriously after the country's disappointing Q2 GDP result, rebounded and had a positive impact on the IHSG. Lastly, positive European openings made sure the IHSG would stay in the green zone.
Last week (22-26 July 2013), Indonesia's main stock index (IHSG) ended 1.39 percent down at 4,658.87. The daily value of transactions on the regular market narrowed to an average of IDR 3 trillion (USD $300 million) from IDR 3.84 trillion in the previous week. Foreigners still recorded net sales amounting to IDR 92.9 billion (USD $9.3 million). Lack of positive sentiments, financial results of companies that were below expectation and the continued weakening of the rupiah against the US dollar resulted in the decline of the index.
Investment realization in Indonesia grew 30.2 percent to IDR 192.8 trillion (USD $19.8 billion) in the first six months of 2013 (compared to the same period last year). This result implies that 49.4 percent of the investment target for full 2013 has been achieved. The Indonesia Investment Coordinating Board (BKPM) aims to collect IDR 390.3 trillion in investments this year. This target is divided in domestic direct investment (DDI) of IDR 117.7 trillion and foreign direct investment (FDI) of IDR 272.6 trillion.
Despite the fact that Indonesia reported the world's third-highest GDP growth in 2012 (behind China's 7.4 percent and Saudi Arabia's 7.1 percent), supported by rising consumption by a burgeoning middle class and significant increased foreign direct investment, the country's performance in terms of competitiveness is disappointing. It is cheaper to import products from countries that contain competitive businesses than to produce them in Indonesia.
