In July 2023, Indonesia's Manufacturing Purchasing Manager's Index (PMI) surged to 53.3, rising 0.8 points from June 2023's figure of 52.5. This indicates the manufacturing sector's continued growth for 23 consecutive months, reaching its fastest expansion since September 2022. S&P Global attributes this growth to the sector's robust momentum in the early third quarter, driven not only by increased domestic demand but also by rising new business from overseas, signalling a widespread improvement in demand conditions. The data suggests a strong acceleration in total new orders, bolstering the production of Indonesian goods at the fastest pace in ten months.
However, higher raw material costs led to increased operating expenses in July, resulting in a slight rise in average output prices, which had experienced a minor decline in June. While inflation remained below the average record of the past two years, manufacturers shared the additional cost burden with clients. Despite relatively low inflation, rising input prices indicated that inflation remained a primary concern for private sector firms heading into the second half of 2023. Supply conditions improved, evident from shorter order delivery times in July.
