Manufacturing Activity Indonesia Continues to Contract in April

Although the pace is slowing, Indonesia’s manufacturing sector continued to contract in April 2015, the seventh consecutive month of declining manufacturing activity in Southeast Asia’s largest economy. Indonesia’s latest HSBC purchasing manager’s index (PMI) was 46.7, up slightly from 46.4 in March (which constituted a historic low for Indonesia). A score below 50.0 signals contraction in manufacturing activity. Primary factors that caused this contraction are continued declining export orders and continued weak domestic demand.


Pollyanna De Lima, economist for the HSBC Markit survey, stated that Indonesia’s April contraction signals the ongoing fragility of the Indonesian manufacturing sector as both domestic and export markets form sources of weakness.


Indonesia Manufacturing PMI:

Costs of imported raw materials rose due to the weak rupiah and therefore Indonesian businesses could not price their output competitively on the international market. This resulted in a sharp fall of new business from abroad (output declined at the second-quickest pace since the start of the index). Moreover, unconducive weather conditions hampered domestic manufacturing activity. Due to reduced activity Indonesian employers trimmed employment for the ninth consecutive month.

Conditions are expected to remain tough in the foreseeable future.

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