Indonesian Manufacturing Performance Drops Again, Ministry Of Industry Reveals The Culprit

JAKARTA - Indonesia's manufacturing performance fell again in June 2025. This weakening was demonstrated by the decline in PMI in June and May by 0.5 from 47.4 for May to 46.9 in June 2025.

The weakening of Indonesian PMI was also attended by PMIs in parts of the Asean countries, such as Malaysia from 48.8 to 48.6, Thailand, 49.9 to 49.5, Vietnam 50.5 to 45.6 and Singapore 50.6 to 49.6.

The Ministry of Industry (Kemenperin) assessed that the decline in Indonesian PMI in June 2025 was due to two main factors. First, industrial companies are still waiting for the pro-business deregulation policy package. Second, weakening export and domestic market demand as well as decreasing people's purchasing power.

"The two factors that caused PMI Indonesia in June 2025 to still contract and decline compared to May 2025, namely, first, industrial companies are still waiting for pro-business policies and the second to weaken export market demand and the domestic market as well as decrease purchasing power in Indonesia," said Ministry of Industry spokesman Febri Hendri Antoni Arief as quoted from his written statement, Wednesday, July 2.

Last month, industry entrepreneurs were still waiting for pro-industrial policies, such as policies to protect the domestic market from the onslaught of cheap imports. The policy of tightening the entry of cheap imported goods into the domestic market is eagerly awaited by entrepreneurs.

This policy is expected to be able to reduce, limit cheap imported goods that have narrowed domestic product demand in the domestic market. This narrow demand space will be wider open to domestic products amid the pressure of reducing people's purchasing power.

One of the pro-industrial policies that entrepreneurs have been waiting for is the revision of Permendag No. 8 of 2024. The revision of the finished product import relaxation policy submitted in this budget policy package and ease of doing business has been announced by the government on Monday, June 30, 2025 and is a positive step that can foster optimism for industrial entrepreneurs.

However, the positive impact of this policy will only be felt in the next two months since it was announced, especially in the textile industry, finished clothes, and finished clothing accessories.

"TPT industrial companies and the finished clothing industry (must) be patient waiting for the impact of the implementation of this policy. However, the announcement of this policy is certainly a positive signal for the industry, especially the TPT industry and finished clothing," he said.

According to Febri, industrial companies are also still waiting for the determination of an entry port change policy for finished imported products. So far, he said, imported products have become cheaply priced through various Indonesian ports.

With this entry port restriction, the onslaught of cheap imported products in the domestic market will decrease and at the same time increase domestic demand for domestic products.

"Restrictions on entry ports for imported products so cheaply valuable are very important for domestic industries, especially for industries whose products are difficult to compete with cheap imported products from producing countries experiencing oversupply. This policy will be able to increase demand for industrial utilization that produces products that are in tight competition with cheap imported products," he said.

Febri assessed that the signing of the IEU CEPA was also eagerly awaited by industrial companies, especially export companies. The global trade war has forced export-oriented industries to actively open markets to new export destination countries.

The IEU-CEPA is expected to facilitate this, which part of Indonesia's manufacturing products can enter the European Union and compete with other state manufacturing products. This policy is eagerly awaited by industrial companies and has grown deep optimism, especially in export-oriented industrial companies.

"They are optimistic that after signing the IEU-CEPA, the European market will be wide open to their export products," said Febri.

Meanwhile, the inner market also faces a decline in people's purchasing power. People prioritize their funds to meet basic needs rather than consuming manufactured products, especially secondary or tertiary products.

In the upper-middle-income community group, they also tend to prioritize saving or investing their funds in order to anticipate future risks rather than buying certain level manufacturing products.

On the other hand, government spending, especially spending on manufactured products, only started in mid-June 2025. Government spending on infrastructure and construction projects has been felt, especially for the ceramic, cement, glass, iron and steel industries.

Likewise, the government's incentive policy for school holidays this year will take place at the end of June 2025 and when it first entered school. Government incentives during school holidays were also felt by the food industry, beverage industry, the paper industry as well as the textile industry and the finished clothing industry.

"With the start of government spending on manufacturing products as well as school vacation incentives and increasing demand ahead of the new school year, it is hoped that it can increase people's purchasing power, especially to buy manufactured products in the future," said Febri.

Responding to the contraction of Indonesian manufacturing PMI in June 2025, Usamah Bhatti as the Economist of S&P Global Market Intelligence said that the decline in the condition of Indonesia's manufacturing sector was deepening in mid-2025. According to him, this was due to weak market demand which caused a decline in production and sales. The decline in sales was mostly from the domestic market.

This decline prompted the company to implement a retrenchment strategy by reducing labor and purchasing activities. "In the future, the company is less optimistic about output forecasts, even self-confidence has also dropped to its lowest position in eight months," he concluded.

The countries in ASEAN whose manufacturing PMIs also experienced contractions, namely Vietnam (48.9), Malaysia (49.3) and Myanmar (49.0). Meanwhile, other manufacturing countries that also experienced weakening manufacturing PMIs, namely England (47.7), France (47.8), South Korea (48.7) and Germany (49.0).