Indonesia's manufacturing growth accelerates further in February
Production has risen at the strongest pace since May.
Indonesia's manufacturing sector registered a marked improvement in operating conditions midway through the opening quarter as the headline S&P Global Indonesia Manufacturing Purchasing Manager’s Index (PMI) rose to 53.6 in February, from 51.9 in the previous month.
This indicates a further pick-up in the health of the goods-producing sector. Additionally, the survey's headline measure rose to an 11-month high and indicated a solid improvement in factory operating conditions.
Central to February's upswing was an accelerated rise in demand for Indonesian goods.
New orders increased for a third successive month, with the rate of growth its strongest since March 2024. Panel member reports suggested that market activity had picked up, supporting strong influxes of new work.
Sales growth was domestic-driven, sub-index data implied, as an accelerated increase in total new orders was accompanied by a marginal drop in new export business.
A strong rise in new orders – the fastest in almost a year – drove accelerated expansions in output, purchasing activity, and employment. In fact, February's increase in workforce numbers was the steepest ever recorded by the survey. Looking ahead, Indonesian manufacturers reported a strong level of optimism, with growth expectations at their most bullish in almost three years.
To fulfill greater client demand, the Indonesian factory output expanded further in February. The expansion was strong and the quickest in nine months.
Increased new orders also prompted companies to bolster capacity, with employment levels rising at the fastest rate since survey data were first collected nearly 14 years ago.
Nonetheless, with the New Orders Index registering above the Output Index, therefore implying that production growth was outstripped by that of sales, February saw an uptick in backlogged work. The pace of accumulation was only mild, however.
To accommodate greater production requirements, manufacturers purchased additional inputs. Buying growth also picked up on the month and was its quickest since last May.
An accelerated expansion in purchasing allowed businesses to replenish their pre-production inventory levels. The extent to which stocks of inputs were raised was among the sharpest on record. The filling of warehouses was achieved despite longer supplier delivery times. However, delays from vendors were marginal.
Companies' efforts to grow stocks and raise staffing capacity were aligned with Indonesian manufacturers' optimistic production outlook for the year ahead. Expectations for output were their strongest since March 2022.
Meanwhile, factory cost pressures intensified midway through the first quarter. Unfavourable exchange rate movements were exacerbated by higher prices for raw materials and mark-ups from vendors, anecdotal evidence suggested.
To protect their profit margins, Indonesian goods producers raised their charges in February. Some panellists also mentioned the VAT rise as a reason to increase selling prices. That said, the rate of output price inflation was modest and the slowest in four months.
"The pick-up in growth momentum seen across Indonesia's manufacturing sector carried through to February, boding well for a strong opening quarter for 2025," Joe Hayes, Principal Economist at S&P Global Market Intelligence, said.
Demand conditions were highly supportive of growth, prompting a survey-record expansion in employment and greater purchasing volumes. We also saw companies turn more bullish towards the outlook as confidence rose to its Indonesia's manufacturing sector saw significant growth in February 2025, indicating an evident improvement in operational conditions during the early months of the year.
The boost in production was largely fuelled by a notable increase in new orders, rising at the fastest rate observed in almost a year. Notably, the workforce expanded at an unprecedented rate, suggesting a robust hiring environment. Manufacturers exhibited a strong sense of optimism, with growth expectations reaching their highest levels in nearly three years.
