Manufacturing Activity Indonesia Expands in March, End of Long Negative Streak
After having experienced 17 straight months of contraction in the manufacturing sector, the Nikkei Indonesia Manufacturing Purchasing Managers' Index (PMI) survey rose to a reading of 50.6 in March 2016 from 48.7 in the preceding month (a reading above 50 indicates expansion of manufacturing activity) according to a statement released on Friday (01/04). This is very positive news although Indonesia's export performance remains in a state of decline. Manufacturing expansion was primarily caused by a rise in domestic demand.
Markit economist Pollyanna De Lima stated that Indonesia's PMI - which involves a composite of manufacturing output, new orders, export and employment measures - rose for the first time since September 2014 supported by higher production brought about by higher new orders. These new order came primarily from Indonesia, not from abroad. In fact, export orders continued to slide.
Employee numbers in Indonesia remained largely unchanged in the manufacturing sector. This is in fact good news as we have seen job cuts in the past 19 months in Southeast Asia's largest economy.
De lima noted: "Though the sector has finally moved into expansion territory, firms will still be looking for signs of a convincing recovery taking hold before hiring additional workers. If cost inflation continues to ease, Indonesian manufacturers may then look to gain a competitive edge through cutting output prices."