Indonesian Manufacturing PMI Plunged to 50.1 in March 2026, Impacted by Middle East Conflict
JAKARTA - The performance of manufacturing, reflected by the Purchasing Managers' Index (PMI), Indonesia's manufacturing experienced a decline in the March 2026 period even though it was still in the expansion phase.
The S&P Global report showed Indonesia's manufacturing PMI index fell sharply to 50.1 in March 2026 from 53.8 in February. S&P Global said the decline marked a change in almost stagnant operating conditions in the manufacturing sector.
"March survey data show that a decline in output and new order receipts in Indonesia's manufacturing sector has occurred again, with the sharpest decline in output in nine months," S&P Global Market Intelligence economist Usamah Bhatti said in a statement, Wednesday, April 1.
S&P data in March showed a new decline in production levels after four months of growth and a large increase in February. The rate of decline is moderate but sharp since June 2025.
Panelists reported that the decline generally reflected the scarcity of raw material supplies and rising material prices, which were partly influenced by the war in the Middle East and global economic turmoil.
At the same time, new demand volumes slowed for the first time in eight months in March. The decline was only in a marginal range, but it illustrates a major change from the massive expansion in the previous survey period.
In addition, manufacturers said that declining demand and increased competition were weighing on new business flows. New export orders also fell after rising in February.
The decrease in demand reduces capacity pressure, so companies can complete existing work. The backlog of work fell for the first time since last October. Meanwhile, the decline in sales led to an increase in post-production inventories because unsold products were held as stock.
In line with production and demand trends, companies have reduced labor levels twice in three months even though the number is small. At the same time, manufacturers reduced purchasing activity for the first time since July 2025.
"Anecdotal evidence also suggests that rising material prices and supply shortages are the main factors behind the decline," he added.
Looking ahead, S&P said Indonesian manufacturers showed optimism about next year's estimates. The level of optimism was recorded as strong and increased compared to the February period.
This optimism is supported by the hope that demand will improve again and there will be no further escalation of the conflict in the Middle East. Even so, S&P also said that the level of sentiment was below average.
"Manufacturing companies remain confident that output will rise this year. However, March data highlights the vulnerability of Indonesia's manufacturing sector to war, especially in terms of prices and supplies," he added.