Indonesia’s Manufacturing Activity Gains Momentum in April 2021 Thanks to Steep New Order Growth
It is positive that Indonesia’s manufacturing activity not only kept momentum going in April 2021, but even managed to gain momentum with the IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) showing a reading of 54.6 points in April 2021, up from 53.2 points in the preceding month (a PMI reading above 50.0 indicates expansion, while a reading below 50.0 indicates contraction).
This is also a good omen for economic growth in the second quarter of the year. It is widely assumed that Indonesia will exit the economic recession in Q2-2021.
However, before becoming too optimistic, we need to be aware that these PMI data come in the form of a month-on-month (m/m) comparison. As such, solid growth compared to March 2021 does not mean that we are back at levels of manufacturing activity seen in pre-COVID-19-crisis days. On the contrary, manufacturing activity remains far from the ‘normal’ levels. What the PMI chart of Indonesia above actually shows is a relatively mild recovery compared to the massive declines in April-June 2020. This may also explain why manufacturing companies are still reluctant to hire additional staff, leaving employment levels broadly unchanged (despite the sharp rise in new orders). As a result, backlogs of work rose for the second month running, and at a solid pace that was the most marked in more than eight years.
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