In December 2024, Indonesia's manufacturing sector witnessed a notable resurgence, marking its first expansion since June of the same year. This growth was driven by a significant increase in production volumes accompanied by a rise in new orders, as highlighted by the S&P Global Indonesia Manufacturing PMI report.
The Purchasing Managers' Index (PMI) surged to 51.2, a marked increase from 49.6 in November, successfully crossing the critical threshold of 50, which demarcates the line between growth and contraction in the manufacturing sector. The December PMI reading reflects the highest levels seen since May 2024, indicating a robust improvement in demand conditions both locally and internationally.
Paul Smith, the economics director at S&P Global Market Intelligence, emphasized that Indonesia's manufacturing economy concluded 2024 on an optimistic note, noting that the sector expanded for the first time since the mid-year, supported by clear evidence of increased sales and output. For the first time in six months, new orders showed a positive trend, including a slight uptick in export orders.
In response to this newfound demand, firms began to enhance their staffing levels and ramp up purchasing activities. Moreover, an increase in input inventories suggests a prevailing optimism regarding the prospect of sustained growth in the upcoming months. Despite this encouraging growth narrative, concerns regarding inflationary pressures remain.
Notably, input costs have seen an uptick, primarily attributed to the strengthening of the US dollar and ongoing supply chain constraints, which have compelled manufacturers to pass these increased costs onto consumers. This has led to a consistent rise in output prices for the third consecutive month. Smith remarked, "While inflation currently appears to be broadly contained and remains below long-term averages, it is essential to closely monitor price trends as we move into the new year." This mixed outlook underscores the importance of vigilance in the face of a potentially volatile economic landscape as Indonesia's manufacturing sector navigates the challenges and opportunities ahead..