Indonesia factory output, jobs fall for fifth time in six months
Job losses mount even as new orders creep back into growth.
Indonesia's manufacturing sector saw broadly stable but slightly weaker business conditions in August, as a renewed dip in production and employment offset a modest pickup in new orders, the latest S&P Global survey showed.
The headline Indonesia Manufacturing Purchasing Managers' Index (PMI) slipped to 49.8 in August from 50.2 in July, moving back below the 50.0 no-change threshold and reversing the previous month's slight improvement. The reading suggested the third quarter had so far brought largely stable, if uneven, operating conditions.
The marginal deterioration was driven chiefly by fresh falls in output and staffing levels, with production and employment now having declined in five of the past six survey periods. Manufacturers linked the latest drop in output to stronger competition, subdued demand and higher goods prices. Some firms responded by cutting payrolls, whilst others struggled to retain staff amid voluntary resignations. Backlogs of unfinished work rose for a second consecutive month, though the build-up was softer than in July.
There were, however, tentative signs of resilience on the demand side. New orders returned to growth for the first time in three months, albeit only marginally, with reports of improving demand and higher customer requests at some firms offset by others citing continued weak demand, stiffer competition and reduced purchasing power among clients.
Purchasing activity was unchanged in August after five straight months of decline, as stronger new work encouraged some firms to buy more inputs whilst subdued order books led others to pull back. Delivery times for inputs lengthened slightly, though the delays were mild. Stocks of purchases rose for the first time in five months, with some manufacturers building safety stocks ahead of expected rises in raw material costs. Post-production inventories, by contrast, were cut back for a fourth consecutive month, at a pace matching May 2025 as the joint-fastest in just over four years.
Inflationary pressures eased further in August, though input costs and output charges remained elevated by historical standards, with high raw material prices and rising supplier charges often passed on to customers.
Business confidence continued to recover from April's low, rising to a seven-month high on expectations of stronger demand and stable market conditions supporting higher production over the next 12 months.
Maryam Baluch, economist at S&P Global Market Intelligence, said the data pointed to a mild deterioration in the health of Indonesia's manufacturing sector, as renewed falls in output and employment reversed July's improvement whilst demand conditions remained broadly neutral.
She added that easing inflationary pressures and continued recovery in business confidence suggested manufacturers remained hopeful that production would rise over the coming year, despite the sector's muted overall performance.
