Manufacturing Slump Deepens as Indonesia’s PMI Drops to 46.9

Indonesia’s manufacturing sector showed further signs of weakness in June as the country’s Purchasing Managers’ Index (PMI) fell deeper into contraction territory. 

According to S&P Global, Indonesia’s manufacturing PMI dropped to 46.9 in June 2025, down from 47.4 in May, marking continued contraction for Southeast Asia’s largest economy. A PMI reading below 50 indicates a decline in manufacturing activity. 

Industry Ministry spokesperson Febri Hendri Antoni Arief said the lower PMI reflected ongoing uncertainty in the industrial sector, with manufacturers holding back production while waiting for more pro-business policy packages. Weaker demand in export and domestic markets, along with declining household purchasing power, have also dampened output. 

“The contraction shows that the industry is still waiting for clear policy support, while facing weaker export orders and softer local demand,” Febri said. 

University of Indonesia economist Ninasapti Triaswati warned the persistent decline in the manufacturing PMI indicates that Indonesia’s macroeconomic conditions are under mounting pressure. 

“The weakening signal comes from two sides: investment and employment. This means some of our companies are going bankrupt, a dangerous sign for manufacturing, which has high employment absorption,” Nina told Beritasatu.com on Wednesday. “It should prompt the government to re-evaluate what is happening to our labor-intensive sectors.” 

Nina added that recent waves of layoffs are partly driven by companies adopting new technologies and automation to maintain productivity, which has come at the cost of jobs. 

However, she said that while the manufacturing sector struggles, agriculture is showing resilience and could offer new economic opportunities if leveraged strategically. 

“What actually grew strongly in the first quarter of 2025 was the agriculture sector. There’s an opportunity for Indonesia to shift more jobs there, then expand into agribusiness and agro-based manufacturing,” she said. “We also have the maritime, forestry, and plantation sectors, which support food security. This could strengthen food self-sufficiency and feed into the manufacturing base.” 

Source: Jakarta Globe 

June Inflation Ticks Up As Food Prices Climb

Indonesia’s inflation edged up in June as food prices rose amid Idul Adha festivities and the start of school holidays, both of which boosted household consumption.  

Statistics Indonesia (BPS) reported on Tuesday that the consumer price index (CPI) rose by 0.19% month-to-month (mtm) in June, following a 0.37% monthly deflation in May. This pushed the year-to-date inflation to 1.38%.  

Food, beverages and tobacco were the main drivers of June inflation, contributing 0.13 percentage points to the monthly figure. This was primarily due to higher prices for rice, which added 0.04 percentage points, along with bird’s eye chili, shallots and tomatoes.  

As a result, volatile food prices rose 0.77 percent mtm, after a sharp 2.48 percent deflation in May.  

Transportation costs contributed an additional 0.01 percentage points to June inflation, driven by a 5.81% jump in airfares. However, this was partly offset by lower prices for sea and train travel, which fell by 16.96% and 4.2%, respectively, due to holiday discounts.  

On May 23, Coordinating Economic Minister Airlangga Hartarto unveiled a new stimulus package aimed at supporting consumer spending in the second quarter and boosting gross domestic product (GDP) growth to 5 percent following a disappointing first quarter.  

The initiative, effective in June and July, includes discounts on train, airplane and ferry tickets, as well as toll road discounts for around 110 million eligible drivers.  

Nevertheless, administered prices still rose by 0.09% mtm, following a 0.02% decline in the previous month. The increase was driven by rising costs of household fuel, airfares and machine-rolled clove cigarettes.  

Core inflation, which excludes volatile and administered prices, increased by 0.07% in June, nearly unchanged from the 0.08% rise recorded in May. 

On an annual basis, headline inflation climbed to 1.87%, up from 1.6% in May, though still below the 2.51% recorded in June last year.  

The "personal care and other services" category saw the highest annual increase at 9.3%, largely driven by rising gold jewelry prices, which have posted steady monthly gains since late 2023.  

While global gold prices and firm domestic demand may continue to exert inflationary pressure, the overall rate remains within Bank Indonesia’s target range of 1.5% to 3.5%.  

A stable rupiah following the Israel-Iran truce has created room for supportive policy, according to Bank Danamon economist Hosianna Evalita Situmorang.  

“The upcoming July stimulus will play a crucial role in sustaining household spending as economic momentum softens in the second half of the year,” she said in a statement on Tuesday.  

Aside from gold jewelry, volatile food prices and airfares have consistently emerged as key inflationary pressures throughout the first half of 2025. 
 

In a separate report also released by BPS on Tuesday, foreign tourist arrivals to Indonesia rose by 14% year-on-year in May to 1.31 million people. Visitors from Malaysia, Australia and Singapore dominated the monthly tally.  

In total, 5.63 million tourists entered the country in the first five months of the year, a 7.44% increase compared with the same period in 2024. 
 

Source: The Jakarta Post 

Indonesia Offers to Buy US Aircraft, Wheat in Tariff Negotiations

Indonesia will offer to step up purchases of aircraft by state carrier Garuda Indonesia and wheat by instant noodle giant Indofood, in tariff talks with the United States, its chief economics minister told Reuters. 

Airlangga Hartarto, who is also the Southeast Asian nation's lead negotiator, said the government has also offered near-zero tariffs on key American exports, including agriculture products, which he said pay tariffs of between 0% and 5%. 

Jakarta is facing a 32% tariff in U.S. markets. It previously said it would sign a USD 34 billion pact with U.S. partners next week, which includes commitments to buy more U.S. goods as well as investment by Indonesian companies in the United States. 

"It will be near zero (tariffs for U.S. main exports), but it will depend as well on how much the tariffs we get from U.S.," Airlangga said. 

Garuda's CEO has said it is in discussions with U.S. Boeing to buy up to 75 units of aircraft. Garuda and Indofood group did not immediately respond to requests for comment. 

The U.S. goods trade deficit with Indonesia was USD 17.9 billion in 2024, according to the U.S. Trade Representative. U.S. exports to Indonesia include soybeans, petroleum gases and aircraft, Indonesian government data showed. 

When asked whether the trade talks include military deals, Airlangga said they were "not part of the negotiation". 

Susiwijono Moegiarso, a senior official with Indonesia's Coordinating Ministry for Economic Affairs, told Reuters that in return, Jakarta has asked the United States for preferential tariffs on its main exports, including electronics, textiles and footwear. 

"We want them to lower the tariffs (for those goods) as low as possible," he added. 

Indonesia has also offered the United States opportunities to invest in critical minerals projects, including in its abundant resources of copper, nickel and bauxite. 

Source: Reuters