Indonesia’s manufacturing sector contracts further in October

Output and new orders fall for 4th straight month.

Indonesia’s manufacturing economy had declined further in operating conditions in October as output, new orders and employment all deteriorated a bit amid reports of subdued market conditions.

The headline seasonally adjusted S&P Global Indonesia Manufacturing Purchasing Manager’s Index (PMI) remained below the crucial 50.0 no-change mark in October for the fourth consecutive month, posting 49.2. That was unchanged since September, thus suggesting another marginal decline of operating conditions.

Output and new orders both slightly fell in October, extending the present period of decline in each case to four months. Subdued market demand was noted with purchasing power amongst clients reported to be lower.

This was common in both domestic and international markets with geopolitical uncertainty said to have led to an eight straight monthly decline in new export orders.

“Indonesia’s manufacturing economy continued to run in a subdued performance during October, with production, new orders and employment all declining marginally since September. Panelists often noted that market activity was underwhelming, which in some cases was linked to geopolitical uncertainties resulting in caution and inaction amongst clients,” said Paul Smith, economics director at S&P Global Market Intelligence.

With the subdued business environment, firms were led to cut staffing levels at their plants on average for the third time in the past four months. Despite a marginal drop in employment, backlogs of work fell for the fifth consecutive month, with the decline being the fastest since January 2021. Firms noted being able to comfortably keep on top of overall workloads whilst also indicating that finished goods inventory had risen, somewhat unintentionally given the softness of market demand for the fourth consecutive month.

Purchasing activity continued to fall, extending the current downturn to four months. The latest contraction was linked to weak underlying trends in new orders and production.