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Output rises in Indonesia amid new business gains

Staff Writer |
The health of Indonesia’s manufacturing industry improved in January as a rebound in new work intakes led firms to scale up output.

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However, strong cost increases restricted companies’ purchasing activity, while further job shedding was recorded.

Survey data also highlighted ongoing spare capacity in the sector as backlogs decreased for the thirty-second consecutive month.

Encouragingly, business confidence regarding the 12-month outlook for production improved.

Posting above the crucial 50.0 threshold for the first time in four months, the headline Nikkei Indonesia Manufacturing Purchasing Managers’ Index (PMI) TM – a composite single-figure indicator of manufacturing performance – pointed to an overall improvement in operating conditions across the sector.

The PMI was up from 49.0 in December to 50.4 in January.

Supporting the upward movement in the headline index were increases in new orders and output, both of which expanded for the first time in four months.

The rise in order books was linked by survey participants to better marketing activities and improved client confidence.

Data implied that the upturn was centred on the domestic market as new export orders contracted for the fourth straight month, with firms blaming the reduction on competitive pressures and subdued demand from international clients.

There was a mixed picture with regards to stock levels as holdings of manufactured goods were broadly unchanged and pre-production inventories fell.

Where stocks of finished goods rose, panellists commented on lower-than-expected sales.

Firms noting a decline indicated that orders were fulfilled directly from inventories.

Concurrently, the contraction in stocks of purchases was blamed on lower input buying.

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