Indonesian Manufacturing PMI Increases To 51.9, Expansion Three Months In A Row

JAKARTA - The national manufacturing industry again recorded a brilliant performance for three consecutive months in early 2023.

This is reflected in the results of a survey released by S&P Global which shows that the achievement of Indonesia's manufacturing Purchasing Managers Index (PMI) in March was at 51.9 or an increase compared to the previous month which reached the level of 51.2.

"The expansion phase in March will also extend the period of improving our manufacturing industry condition for 19 consecutive months. Moreover, PMI's growth rate in March is the fastest since last September," said Industry Minister Agus Gumiwang Kartasasmita in a written statement in Jakarta, Tuesday, April 4.

The Minister of Industry said that the expansion rate of Indonesia's manufacturing PMI was in line with the results of the Industrial Trust Index (IKI) which was previously reported by the Ministry of Industry (Kemenperin) in March 2023, which also showed an expansion value of 51.87.

"The manufacturing PMI and IKI in March 2023 both showed that the expansion position was supported by increasing demand from domestic. We are optimistic that with the acceleration of the realization of domestic product spending, new demand will increase in the next period," he said.

Agus said the increase in domestic demand was encouraging increased output and labor. In addition, vendor performance increased and and transportation was getting better, so that raw material supplies increased and production barriers decreased. "This spurs industrial performance to complete orders more quickly," he said.

Although input costs are still increasing, the industry will no longer continue to increase its product price. Thus, it can be concluded that PMI's expansion cannot be separated from improving the company's internal performance and the government's efforts to maintain the domestic market, as well as improving the industrial business climate.

It doesn't stop there, supply constraints in the manufacturing sector in Indonesia are also decreasing this March, so that the time for fulfillment of orders is getting shorter. This is supported by better supplier and transportation performance.

Therefore, Agus continued, his party is focused on spurring productivity in the industrial sector as well as strengthening the domestic market, by optimizing the use of local products and import substitution.

"This effort is in accordance with President Joko Widodo's direction at the Domestic Products Matching Business event some time ago, that the purchase of local products can boost national economic growth and support industrial competitiveness in the country," he said.

S&P Global Market Intelligence Economics Associate Director Jingyi Pan said supply pressure was becoming easier to regulate as shipment times from suppliers were faster, while input price inflation was still below the 12-month average, realizing the effectiveness of previous levels of rise.

Meanwhile, business sentiment remained positive among Indonesian producers at the end of the first quarter, as well as an improving level of confidence in business.

It was noted that Indonesian manufacturing PMI in March 2023 was again able to pass through the world's largest manufacturing center PMI, namely, China (50.0) and back higher than PMI ASEAN (51.0), Malaysia (48.8), Vietnam (47.7), Taiwan (48.6), Japan (49.2), South Korea (47.6), England (48.0), the United States (49.3), and Germany (44.4).