Manufacturing activity in Indonesia has started to pick up at the end of the first quarter of 2023, with the country's manufacturing index reaching a record high since September 2022. According to S&P Global data released on Monday (3/4/2023), Indonesia's manufacturing activity was reflected in the Purchasing Managers' Index (PMI), which stood at 51.9 in March 2023. This is a slight increase from February 2023, which recorded a PMI of 51.2. The index of 51.9 is the highest in the last six months, indicating that manufacturing activity in the country has been in the expansion phase for the past 19 months.
The PMI uses 50 as a starting point. If the index is above 50, it indicates that the business world is in an expansion phase, while a reading below 50 means that it is contracting. According to S&P Global's report, this increase in the index shows a significant improvement in demand and a growing consumer base. Although export demand has declined amid a sluggish global market, the decline has been moderate. The PMI data also indicates an increase in the number of jobs created in line with rising demand. At the same time, post-production supply levels have remained unchanged because the increase in production can be offset by faster order completion.
Although input cost inflation has increased in March, it is relatively smaller compared to the same period last year. Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, said that the PMI increase in Indonesia's manufacturing sector was supported by the rise in production and the improvement in purchasing activity. These positive signs in Indonesia's manufacturing activity suggest that the country's economy is gradually recovering, which is good news for both businesses and consumers alike.
