The HSBC Markit Purchasing Managers’ Index (PMI) of Indonesia contracted to 48.0 in November 2014 (from 49.2 in the previous month), the weakest level since reporting began in early 2011 amid weak demand and higher fuel prices, official data showed on Monday (01/12). A reading below 50.0 indicates that manufacturing activity has contracted. Su Sian Lim, Economist at HSBC, said that the recent subsidized fuel price, rupiah depreciation, and weak external demand were the key drivers for this poor performance.

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On Monday (03/11), several important macroeconomic data were released by statistics Indonesia. Firstly, inflation was relatively high in October at 0.47 percent month-on-month (m/m). Secondly, Indonesia posted another trade deficit in September (USD $270 million). Thirdly, Indonesia's October manufacturing activity showed a contraction (the country’s manufacturing Purchasing Manages' Index fell to a 14-month low of 49.2 in October). Lastly, a total of 791,300 foreign tourists visited Indonesia in September.

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Statistics Indonesia (BPS) released various economic data today (01/10) - including inflation, the trade balance and manufacturing activity - that give a good indication about the state of the Indonesian economy. Although not all data was positive, market participants were content, evidenced by an appreciating rupiah exchange rate and rising Indonesian stocks. Based on the Bloomberg Dollar Index, the rupiah appreciated 0.43 percent to IDR 12,135 per US dollar, while the Jakarta Composite Index climbed 0.06 percent on Tuesday (01/10).

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As expected, the pace of inflation in Indonesia eased in August 2014. On Monday (01/09), Statistics Indonesia announced that August inflation reached 0.47 percent, implying that on a year-on-year basis inflation eased to 3.99 percent from 4.53 percent in the previous month. Meanwhile, Indonesia posted a USD $124 million trade surplus in July 2014 mainly due to declining imports of machinery and mechanical instruments. The country’s manufacturing activity, however, contracted in August for the first time in a year.

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Growth of Indonesia’s non-oil and gas manufacturing industry in the first half of 2014 reached 5.49 percent (year-on-year) and thus outpaced the country’s general economic growth of 5.17 percent (yoy) over the same period. Indonesia’s manufacturing industry growth was particularly supported by growth in a number of sectors: Food, Drinks and Tobacco (+9.62 percent), Wood and Other Forest Products (+6.35 percent), Transportation Equipment Industry and Machinery (+4.52 percent), and Other Industrial Products (+15.77 percent).

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Although Indonesia’s debt-to-GDP ratio is currently still at a safe level at roughly 32.8 percent, the country’s central bank (Bank Indonesia) expressed its concern about the high debt service ratio (DSR) and debt-to-export ratio. The DSR is the ratio of debt service payments (principal and interest) of a country to its export earnings. Generally, a healthy ratio is somewhere in the range of 0 and 20 percent. However, Indonesia’s DSR has risen from 20 percent in 2007 to 50 percent in 2014.

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Indonesia's HSBC Markit purchasing managers' index (PMI) reached its highest level ever at 52.4 in May 2014, up from 51.1 in April 2014, as new domestic orders rose (indicating an improvement in domestic activity). According to HSBC economist Su Sian Lim, the outcome may be evidence that the slowdown in domestic manufacturing is starting to bottom out. In the previous two months, the index indicated slowing manufacturing activity in Southeast Asia's largest economy although remained above the 50.0 level for nine straight months.

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On 11 May 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic topics such as the revision of the Negative Investment List, an analysis of GDP growth in Q1-2014, the benchmark interest rate, the current account deficit, manufacturing, unemployment , the offical result of the legislative election, and more.

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The Indonesian government revised down its target for the country's manufacturing growth in 2014 to 6 percent year-on-year (yoy) from 6.4 to 6.8 percent (yoy) previously. Main reason for the downgrade was the lower than expected GDP growth result in the first quarter of 2014. Earlier this week, Statistics Indonesia announced that the Indonesian economy expanded 5.21 percent in Q1-2014, the slowest quarterly growth pace since the fourth quarter of 2009. Last year, Indonesia's manufacturing sector grew 6.19 percent (yoy).

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On 4 May 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic topics such as macroeconomic assumptions of the Indonesian government, April inflation, the March trade balance, April manufacturing, an update on the rupiah, the 2014 presidential election, and more.

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The Indonesia Nikkei Manufacturing Purchasing Managers Index (PMI) showed a slight improvement to a reading of 51.7 in May 2018, up from 51.6 in the preceding month, meaning that activity in Indonesia's manufacturing sector expanded last month (a reading above 50.0 indicates expansion, while one below 50.0 indicates contraction). The PMI index measures the activity level of purchasing managers in the manufacturing sector. This survey is closely watched as purchasing managers usually have early access to data about their company's performance, which can be a leading indicator of overall economic performance.

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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.

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Indonesia's Nikkei Manufacturing Purchasing Managers' Index (PMI) eased to 50.7 in March 2018 from a reading of 51.4 in the preceding month (when manufacturing activity touched a 20-month high in Southeast Asia's largest economy). Softer expansion in output and new orders were cited as reason for slowing growth. A reading above 50.0 indicates expansion in manufacturing activity, while a reading below 50.0 indicates contraction.

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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.

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One method to ignite structurally high economic growth for a sustained period of time in Indonesia is to encourage the development of the country's stagnant manufacturing sector. A thriving manufacturing industry (especially when it can export domestically manufactured products) will accelerate economic growth and generate plenty of employment opportunities (which will then encourage rising household consumption).

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Manufacturing activity in Indonesia continued to contract in January 2018 (for the second month in a row) albeit at a slower pace. The Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) rose from 49.3 in December 2017 to a reading of 49.9 in January (a reading below 50.0 indicates contraction, while a reading above 50.0 indicates expansion in manufacturing activity).

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The manufacturing industry of Indonesia remains in a troublesome state. The latest Nikkei Indonesia manufacturing purchasing managers' Index (PMI) reading declined to 49.3 in December 2017, from 50.4 in the preceding month (a reading below 50.0 indicates contraction, while above 50.0 indicates growth in the country's manufacturing activity). It was the first time since July 2017 that Indonesia's manufacturing activity contracted.

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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.

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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.

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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.

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