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Indonesia manufacturing falls back into contraction

Staff Writer |
Falling order books in Indonesia – from both the domestic and external markets – led businesses to lower output, buying levels and employment.

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On the price front, both input costs and factory gate charges rose at slower rates that were weaker than their respective longrun averages. The seasonally adjusted Nikkei Indonesia Manufacturing Purchasing Managers’ Index (PMI) posted its first sub-50 reading in three months during October.

Down from 50.9 in September to 48.7, the latest figure highlighted a moderate deterioration in operating conditions overall. New orders acted as a drag on the PMI, falling for the first time since July. According to survey participants, inflows of new work declined due to weak underlying demand and unfavourable weather conditions.

Furthermore, the rate of contraction was solid overall. The external market was also a source of weakness, although the pace of reduction in new export orders was much softer than that for total new work.

As a consequence, businesses purchased fewer inputs for use in the production process and shed jobs during October.

Buying levels fell for the first time in three months, but only fractionally, while the rate of job losses was marginal. Having increased in each of the previous two months, factory output in Indonesia fell in October. Nevertheless, the rate of contraction was slight overall.

In spite of this, holdings of manufactured goods rose. The rate of accumulation was slight and broadly similar to those seen in the preceding two months.

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