Industrial Confidence Index Drops 1.81 Percent In October 2023, Ministry Of Industry Reveals The Cause

Spokesperson for the Ministry of Industry (Kemenperin) Febri Hendri Antoni Arif. (Photo: Doc. ANTARA)

JAKARTA - The Ministry of Industry noted that the industrial confidence index (IKI) in October 2023 was at 50.70 points.

This position decreased by 1.81 points from the September position which was recorded at 52.51.

Spokesperson for the Ministry of Industry (Kemenperin) Febri Hendri Antoni Arif said, although it was slowing down by 1.81 points, IKI in October was still in an esppansive phase.

"IKI in October 2023 is still at the expansion level, which is 50.70 and that means it will slow down by 1.81 points compared to September 2023, which is a value of 52.51," Febri said in a October IKI assessment release at the Ministry of Industry, Jakarta, Tuesday, October 31.

Febri said, there are three main causes that caused IKI to decline dramatically this month.

First, there is a decrease in global purchasing power, especially in Indonesia's main trading partner countries, especially in China and Europe, which has caused a drastic decline in Indonesia's demand for manufactured products.

"In the domestic market, the decrease in purchasing power is triggered by an increase in energy prices (specifically fuel) and an increase in interest rates. This also causes the cost of funds in the manufacturing sector to increase," said Febri.

Second, the weakening of the rupiah exchange rate which causes the input cost for products with imported raw materials to increase. This causes an increase in production costs. The rupiah exchange rate against the US dollar has decreased in five consecutive months.

Third, are external factors such as the flood of imported products, the circulation of illegal goods, and the increase in energy prices in October 2023.

"We see that the performance of law enforcement and related ministries/agencies has not been able to reduce the flood of imported goods and illegal goods that have undermined the domestic producer market," said Febri.

Based on its constituent components, the manufacturing industry's still expansionary confidence index is caused by new order variables and production which is still experiencing an expansion of 51.72 and 50.83.

Meanwhile, product inventory variables are still contracting at the level of 47.95 from the previous 47.40 in September 2023.

"The decline in expansion of the new order variables is due to the decline in domestic orders abroad and some respondents also said it was due to price competitiveness in the domestic market," he said.

Of the 23 industrial sub-sectors, said Febri, there were 14 sub-sectors that experienced an expansion with a donation of 78.0 percent of gross domestic product (GDP) for the non-oil and gas processing industry in the second quarter of 2023.

The subsectors that experienced the highest decline in IKI were the YTDL machine and equipment industry, the tobacco processing industry and the computer industry, as well as electronic and optical goods.

In general, the value of IKI, which expanded in October 2023, is in line with the percentage of business actors who stated that the condition of their business activities had increased to 30.2 percent, although it decreased compared to the conditions in September 2023 of 32.7 percent.