Manufacturing PMI Rises But Output, Demand Remain Weak

Domestic manufacturing activity has improved but remains in negative territory, as output and demand are weak while producers’ confidence is at a low due to concerns over United States tariffs.

According to the latest monthly report from S&P Global, the manufacturing purchasing managers’ index (PMI) for Indonesia rose to 49.2 in July from a reading of 46.9 in June.

It marks the fourth consecutive month the country’s manufacturing PMI has come in below the 50-point threshold between expansion and contraction.

Manufacturers saw muted new orders, though the survey showed the decline rate was modest, as well as the softest in the past four months.

"July's survey data indicated another negative month for the health of the Indonesian manufacturing economy. Downturns in output and new orders were sustained at the start of the third quarter, but eased from June.” Usamah Bhatti, an economist at S&P Global Market Intelligence, said on Friday.

“At the same time however, there was a renewed fall in new export orders while firms remained in retrenchment mode, as indicated by falling employment and purchasing levels,” Bhatti added.

Companies bought fewer materials in July, citing lower production requirements as they tried to use up existing stock. This extended the decline in purchasing activity for four consecutive months.

The survey also showed that firms faced additional strain on suppliers, with longer delivery times due to shipping delays and disruption caused by the Iran-Israel conflict that lasted 12 days from mid-June.

Furthermore, price pressure increased as cost inflation hit a four-month high amid rising raw material prices. Exchange rate fluctuation also contributed to higher prices for imported goods.

Manufacturers’ expectations for business conditions in the coming year slumped sharply in July as confidence hit the lowest level in the series’ history. Firms raised concerns that US tariffs and clients’ reduced purchasing power would limit production volumes in the year ahead.

S&P Global’s latest survey was conducted between July 10 and 24, meaning that most responses would have been submitted before the government announced the “reciprocal” framework trade deal with the US.

In bilateral trade talks with Washington, Indonesia agreed to a range of regulatory changes to address what the US had deemed as nontariff barriers.

According to a joint statement on the trade framework published on July 22 on the White House website, Jakarta will eliminate tariffs on 99 percent of US goods, including agricultural products, seafood, pharmaceuticals, automotive items and information and communication technology (ICT) equipment.

In return, Washington will reduce its “reciprocal tariff” on Indonesian goods from the 32% threatened earlier to 19%, with a possibility of further cuts for select commodities “not naturally available or domestically produced in the United States”.

Meanwhile, the Industry Ministry reported on Thursday that Indonesia's business confidence index (IKI) had increased to 52.89, up 1.05 points from 51.84 in June.

It attributed the increase to upticks in new orders, inventories and production, though the latter remained in contraction territory, while growth in orders was due to increased demand from both foreign and domestic markets.

“However, a contraction in output shows that business players are still cautious about increasing production amid global uncertainties,” ministerial spokesperson Febri Hendri Antoni Arif said in a statement.

The rise in the IKI indicated the country’s manufacturing index remained in an expansion phase, he noted, which reflected the sector’s resilience amid global uncertainties and the weakening economies of key trade partners like the US, Japan and China, as well as European countries.

Source: The Jakarta Post

Trump’s 19% Tariffs on Indonesia Officially Kick In

US President Donald Trump’s 19% tariffs on Indonesian goods officially kicked in on Thursday, just after the clock struck midnight in Washington.

The Indonesian government has yet to issue a statement following the hikes. While Indonesia has accepted the 19% rate as “final and binding”, Jakarta has been trying to convince the Trump government to lower the import tax on certain imports that the US can’t produce on its own. This includes nickel, palm oil, cacao and coffee.

Just a day before the new tariffs entered into force, Investment Minister Rosan Roeslani revealed that the US had agreed to grant 0% tariffs on Indonesian copper. He, however, did not say whether the zero tariff on copper would take effect on August 7 or another date.

“Seems like they [the US] will reduce the tariffs on nickel as well. Maybe not 0 percent, but far below 19 percent,” Rosan told a business forum in Jakarta on Wednesday evening. 

Chief negotiator Airlangga Hartarto also did not comment much on the tariff cut negotiations for palm oil earlier that day, only saying that it was still “in process”. 

Trump believes that imposing sweeping tariffs across the world can fix the US’ hefty trade deficit. His team reported that the US’ trade imbalance with Indonesia totaled USD17.9 billion in 2024, up by 5.7% year-on-year (yoy). 

Trump started out by slapping a baseline 10% tariff on Washington’s trading partners in April, while at the same time threatening steeper tariffs on countries that he accused of unfair trade, Jakarta included. Indonesia was supposed to face a tariff increase to 32%, but Trump decided to delay the hikes at the very last minute by 90 days to buy time for negotiations.

He even penned a letter to President Prabowo Subianto in July, notifying the latter that Washington would proceed with the plan if Jakarta fails to clinch a trade deal by August. Trump finally agreed to lower the rate to 19% on Indonesia after Prabowo made some major trade concessions, including a commitment to import USD15 billion worth of American energy products. Indonesia also agreed to get rid of 99% of tariff barriers for American industrial and food products.

In an executive order signed by Trump on July 31, the former real estate tycoon announced that the new country-specific tariffs would be effective seven days later or August 7.

Tariffs on other countries also came into force on the same day. These include Cambodia at 19%, the European Union at 15%, Japan at 15%, South Korea at 15%, Thailand at 19%, and Vietnam at 20%.

Source: Jakarta Globe

RI, Australia Forge Strategic Partnership for Health Transformation

The Indonesian and Australian governments have signed a subsidiary arrangement for the implementation of the Australia-Indonesia Partnership for Health Transformation (KITA SEHAT) Program—marking a new strategic collaboration in the health sector.
 

The KITA SEHAT program will run for the next eight years, with the first phase of implementation scheduled in 2025–2029, with a total investment of AUD 100 million.
 

“The signing of this collaboration marks a new chapter in the strategic relationship between Indonesia and Australia in the health sector,” Minister of National Development Planning and head of the National Development Planning Agency (Bappenas) Rachmat Pambudy said in an official statement received here on Tuesday.
 

KITA SEHAT is expected to serve as a catalyst in accelerating the health transformation toward a healthy Indonesia.
 

Bappenas assured that it will strengthen policy synergy and institutional capacity so that each funding initiative and program brings about tangible improvements in public health.

“We want to continue strengthening this collaboration, not only for today and the current generation, but also for the future and for generations to come,” Pambudy added.
 

The KITA SEHAT program aims to support the achievement of health development targets in the 2025–2045 National Long-Term Development Plan (RPJPN) and the 2025–2029 National Medium-Term Development Plan (RPJMN), with a focus on strengthening human and animal health.
 

The program adopts an integrated intervention approach at the national level, with several regions designated as focal points.
 

The program’s primary focus is four key outcomes: strengthening primary health policies and services; improving access to and the quality of services, including those addressing stunting, nutrition, and inclusion of marginalized groups; developing human and animal health workers; and bolstering health security.
 

“Australia and Indonesia have a long history of working together to address health challenges in both countries. This partnership continues through the KITA SEHAT initiative, which will promote the well-being and resilience of families and communities across Indonesia,” Australian Minister for International Development, Small Business, and Multicultural Affairs, Anne Aly, said.

Source: Antara News