The credit rating agency S&P Global reported that Indonesia's manufacturing sector remained in contraction in September 2024, although the situation improved slightly compared to the previous month. The country's manufacturing Purchasing Managers' Index (PMI) stood at 49.2, up marginally from 48.9 in August 2024. 

 

“The unsatisfactory performance of Indonesia’s manufacturing sector is linked to the generally weak global macroeconomic environment in September,” said Paul Smith, Director of Economics at S&P Global Market Intelligence, in a report published on Tuesday, October 1.

 

He added that the ongoing deterioration in manufacturing conditions is reflected in declines in both output and new orders in September. He also noted that manufacturing exports experienced the sharpest decline in almost two years. 

 

Companies have naturally responded to the decrease in demand by cutting back on production, using up inventories, and optimizing operational efficiency. Despite this, companies continued to hire workers, as they anticipate better conditions ahead. 

 

“Amid hopes for a more stable operating environment and improved economic conditions in the coming year, confidence in better economic prospects was at its highest level in seven months in September,” he said. 

 

On the pricing front, S&P Global’s report noted that production costs rose sharply, partly due to unfavorable exchange rates, even though inflation was at its weakest level in the past year. 

 

Despite this, companies slightly lowered product prices for the first time since June 2023, responding to quieter market conditions. S&P observed that market demand remained sluggish, and overall economic activity was lower compared to earlier this year. 

Original article here 

This article is published in partnership with Katadata