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Upturn in Indonesia’s manufacturing sector reported in March

Staff writer |
Business conditions in the manufacturing sector of Indonesia improved for the first time since September 2014 during March.

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Production returned to growth territory, driven by an expansion in new order levels. However, backlogs continued to decline and employee numbers remained broadly unchanged.

Input costs and output prices both continued to rise, but at relatively weak rates. The seasonally adjusted Nikkei Indonesia Manufacturing Purchasing Managers’ IndexTM (PMI) – a composite gauge designed to give a single-figure snapshot of manufacturing business conditions – rose to 50.6 in March from 48.7 in February.

The headline figure pointed to an improvement in the operating conditions of Indonesian goods producers, ending a 17-month sequence of deterioration. A higher level of production was one of the reasons for the upturn in Indonesia’s manufacturing sector during March.

The increase was the first reported since September 2014, with panellists associating this with an expansion in new orders. However, the rate of growth was modest overall. Similarly to output, new orders expanded for the first time in 18 survey periods. March’s increase was driven by the domestic market, as new export orders contracted further.

Moreover, a lower level of new business from abroad has been reported in every month since October 2014, with anecdotal evidence linking the latest decline to increased international competition.

Outstanding business levels in Indonesia’s goods producing sector fell again during March, extending a trend which began in June 2014.

With backlogs declining, manufacturers kept their employee numbers broadly unchanged. Manufacturing companies operating in Indonesia reported an increase in their buying activity in March.

The rise was the first registered in 14 months, albeit at a relatively weak rate. The higher level of input buying was reflected in a marginal rise in pre-production inventories. Panellists attributed the increase to new order growth.

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