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Today's Headlines Manufacturing PMI
Between November 2020 and June 2021 we saw Indonesia’s manufacturing sector recovering from the ultra-lows that were recorded in the second and third quarters of 2020.
It is positive that Indonesia’s manufacturing activity not only kept momentum going in April 2021, but even managed to gain momentum with the IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) showing a reading of 54.6 points in April 2021, up from 53.2 points in the preceding month (a PMI reading above 50.0 indicates expansion, while a reading below 50.0 indicates contraction).
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 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 contracted in January 2019. It was the first time since exactly a year ago that Indonesia’s manufacturing activity contracted. The headline seasonally adjusted Nikkei Indonesia Manufacturing Purchasing Managers’ Index (or PMI) fell from 51.2 in December 2018 to 49.9 in the first month of 2019, representing largely unchanged conditions in the sector.
Indonesia's manufacturing activity continued to expand in September 2017, albeit at a slower pace compared to the preceding month. Based on the new Nikkei survey, released on Monday (02/10), Indonesia's manufacturing purchasing managers' index (PMI) was recorded at 50.4 points, down from 50.7 in August (a reading of 50.0 separates contraction from expansion in the country's manufacturing activity).
Rising output and stronger export orders caused a modest recovery in Indonesia's manufacturing sector in August 2017. Indonesia's Nikkei-Markit manufacturing purchasing managers' index (PMI) rose to a reading of 50.7 in August, from 48.6 in July (50.0 separates expansion from contraction in the manufacturing industry).
Manufacturing activity in Indonesia fell further in July 2017, touching a one-year low. The Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) was recorded at 48.6 in July, falling deeper into contraction. In the preceding month the index was 49.5 (a reading of 50.0 separates contraction from expansion). Declining new orders caused a sharp and rapid drop in output in Indonesia's manufacturing sector. This then led to job losses, fewer quantities of inputs purchased and depletion in stock levels.
Growth of manufacturing activity in Indonesia eased in May 2017. The Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) dropped to 50.6 in May from a reading of 51.2 in the preceding month. Last month manufacturing activity in Indonesia had hit a 10-month high, hence the lower reading indicates a loss of growth momentum for Indonesia's manufacturing sector. However, it remained comfortably above the boom-or-bust line of 50.0 that separates expansion from contraction.
Good news for Indonesian manufacturers. The Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) recorded a second consecutive month of growth, touching a 10-month high of 51.2 in April 2017 (from a reading of 50.5 in the preceding month), as further expansion in order books encouraged local companies to boost production, while the relatively weaker rupiah rate (versus the US dollar) exerted upward pressure on input prices, with cost inflation reaching an 18-month peak. Subsequently, output prices rose at an accelerated pace.
Latest Columns Manufacturing PMI
Although conditions remain challenging, there is some room for optimism as manufacturing activity in Indonesia reportedly climbed in the last month of 2018. In December 2018 the Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) rose to a reading of 51.2, up from 50.4 in the previous month (a reading over 50 indicates expansion in the nation’s manufacturing sector, while a reading below 50 points at contraction).
Indonesia's manufacturing activity improved in April 2018, touching its fastest growth pace in 22 months, on the back of strengthening domestic demand. The Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) rose to a reading of 51.6 in April 2018, up from 50.7 in the preceding month (a reading above 50.0 indicates expansion in manufacturing activity, while a reading below 50.0 indicates contraction). However, business confidence towards the business outlook (for the year ahead) weakened to the lowest point since December 2012.
Indonesia's manufacturing activity improved markedly in February 2018 with the Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) rising to a reading of 51.4, from 49.9 in January (the 50.0 level separates contraction from expansion). It was the fastest pace of growth for Indonesia's manufacturing sector since June 2016; growth that came on the back of rising output and new orders.
Indonesia is being threatened by deindustrialization. There have been reports that rising minimum wages, the low quality of local human resources, or scarcity of local raw materials have been encouraging companies in certain industries to relocate to other countries in Asia. This partly explains why the manufacturing industry's role toward Indonesia's gross domestic product (GDP) has been on the decline.
Indonesia's Nikkei manufacturing purchasing managers' index (PMI) grew to a reading of 50.4 in November 2017, slightly improving from 50.1 in the preceding month when broad stagnation was detected. A reading above 50.0 indicates expansion in the manufacturing sector, while a reading below 50.0 indicates contraction. Indonesia's November manufacturing growth was primarily caused by accelerating expansion in output and new orders.
Activity in Indonesia's manufacturing industry tumbled into contraction again in June 2017, after having experienced four months of straight growth. The Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) declined to a reading of 49.5 in June, from 50.6 in the preceding month (a reading of 50.0 separates contraction from expansion). Contraction in Indonesia's manufacturing sector is particularly blamed on a stagnation in domestic order books.
In line with expectations, Indonesia's inflation rate eased to 2.79 percent year-on-year (y/y) in August 2016, from 3.21 percent (y/y) in the preceding month. Consumer price inflation in Indonesia fell on the back of declining prices after the Islamic celebrations of Ramadan and Idul Fitri ended in July. On a monthly basis, Indonesia recorded deflation of 0.02 percent (m/m) in August. Meanwhile, the manufacturing sector of Indonesia turned positive again.
The first day of the month - in case of a working day - implies that investors can count on the release of several macroeconomic data from Indonesia, specifically inflation and manufacturing activity. Statistics Indonesia (BPS) announced this morning (01/06) that Indonesia's consumer inflation reached 0.24 percent (m/m), or 3.33 percent (y/y), in May 2016. Meanwhile, the Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) eased to a reading of 50.6 in May from 50.9 one month earlier. Lets take a closer look at these data.
Growth of the manufacturing industry in Indonesia is expected to be significantly weaker in 2015 than initially forecast. Indonesia’s Industry Ministry cut its 2015 forecast for expansion of the country’s manufacturing industry to 6.1 percent (year-on-year) from the previous estimate of 6.8 percent. In tandem with slowing economic growth in Southeast Asia’s largest economy, manufacturing growth has slowed to 4.99 percent (y/y) in Q3-2014. Moreover, the HSBC/Markit PMI contracted to a record low of 48.0 in November 2014.
Despite technical indicators suggesting further upward movement of Indonesia's benchmark stock index (known as the Jakarta Composite Index or IHSG), a positive performance of the index was blocked by external factors. Several Asian stock indices were down responding to Markit's lower US manufacturing PMI (slipping to 55.5 from 57.1 in February 2014). Similarly, China and the Eurozone's manufacturing data showed slowing growth. Continued appreciation of the rupiah exchange rate managed to limit the decline of the IHSG.
