In November, Indonesia's manufacturing sector faced ongoing challenges, marking the fifth consecutive month of contraction due to a decline in new orders. The latest seasonally adjusted manufacturing purchasing managers index (PMI) registered at 49.6, a slight increase from October's 49.2, yet still below the crucial 50-point threshold that indicates growth versus contraction. Interestingly, manufacturing output increased in November.
However, this uptick was achieved primarily by addressing previous backlogs and fulfilling existing orders. The demand for new goods remained subdued, leaving firms with a lackluster approach to order acquisition. As the sector continues to struggle, factory managers made the difficult decision to reduce their workforce.
Reports have indicated that companies refrained from replacing departing employees, and in some instances, enforced layoffs, demonstrating the challenging economic climate. Inflationary pressures for input prices as well as the prices charged to customers also saw a moderation during this period. While there were notable increases in foodstuff prices, overall price stability was observed in November. Despite these hurdles, there remains a glimmer of optimism among Indonesian factory managers as they brace for the future.
Confidence in the industry’s outlook improved, reaching its highest point since February 2024. Companies are optimistic about a potential resurgence in demand and new orders within the coming year, which could lead to increased production. Yet caution is warranted, as analysts have pointed out that without a tangible recovery in sales, which remains uncertain despite the positive outlook expressed by businesses, the lackluster conditions of the manufacturing sector could persist indefinitely.
The PMI data for Indonesia was collected from 400 manufacturers between November 12 and 22, reflecting a comprehensive view of the economic landscape in the region..