Indonesia’s manufacturing sector showed signs of recovery in August, driven by rising export demand after three months of contraction. 

Minister of Industry Agus Gumiwang Kartasasmita reported that the country’s Purchasing Manager’s Index (PMI) climbed to 51.5 points in August 2025, moving back into expansionary territory after staying below the 50.0 threshold from May to July. 

“The strengthening of the manufacturing sector’s performance came from manufacturers with export market orientation last month,” Agus said during a statement at the Parliament Building on Wednesday, September 3. He noted that the food and beverage, chemical, and steel industries were the main drivers of growth. The PMI rebound follows a second-quarter manufacturing expansion of 5.6% year-on-year. 

Despite the improvement, Agus highlighted that sector growth was constrained by policy hurdles. He cited the suspension of industrial salt imports until May 2025 and instability in gas supply under the Special Natural Gas Price (HGBT) scheme. Under the scheme, manufacturers accessed USD 6.5 per MMBTU for only 48% of their gas needs, while the remaining 52% was priced as high as USD 17.76 per MMBTU. Both issues, he added, were resolved only at the end of last month. “If these problems had not emerged, industrial growth would have accelerated further,” he said. 

Economist Usamah Bhatti from S&P Market Intelligence confirmed the sector’s resilience, noting that operational conditions improved for the first time in five months. He said the rebound was driven by the fastest export order growth in nearly two years, which encouraged manufacturers to increase hiring, purchase more raw materials, and expand finished goods inventories. “Manufacturing inflation continued to rise in August, but companies passed on higher production costs to consumers to protect margins,” Bhatti explained. He projected that the positive trend could extend into 2026. 

Meanwhile, Yustinus, Chairman of the Industrial Natural Gas Users Forum (FIPGB), reported that pipeline gas supply has begun to normalize after recent disruptions. “Pressure has returned to normal, but the 48% quota and price surcharge have not been lifted,” he told Katadata on Tuesday, August 19.  

He warned that without changes, industrial sustainability could face serious risks. “If the 48% quota is not removed, industries could collapse in the second half of 2025. Forget about achieving 9% economic growth—just securing affordable energy supply is already being made difficult,” he said. 

This article is published in partnership with Katadata 

Original article here