On Thursday (Sept. 1, 2016) Markit Economics’ Nikkei Manufacturing purchasing managers’ index survey revealed that Indonesian manufacturers increased their output in August due to demands from new businesses, pulling the sector back into growth following a slump in July this year. Pollyana De Lima, an economist at Markit Economist said in a statement, that the return of growth in the country’s manufacturing sector in August is a positive sign.
The Manufacturing PMI is a composite of manufacturing output, new orders, exports and employment measures. Indonesia’s PMI is reported by Markit Economics. According to their report, the country’s PMI inched up to 50.4 in August from 48.4 in July, indicating an increase in the overall manufacturing activity. Manufacturers benefited from decreasing factory gate charges, meaning the costs of manufacturing goods including labor, raw material, energy and other indirect costs including loan interest rates, maintenance or rent. The factory gate charges declined for the first time in the history of the survey, indicating an increasingly competitive environment. The survey data also reflect local companies’ concerns about the short-term outlook for new opportunities and production. This is reflected in a reduction in payroll numbers which was the fastest this year, De Lima explained.
The report also stated that, besides output, also export orders increased in August, ending a 22 month contraction. Additionally, raw material stock and semi-finished goods grew in August, reversing their drop in July. As manufacturers sought to secure stock, expecting higher prices for materials like metals, chemicals, textiles, plastic and paper, pre-production inventories rose at a moderate pace, which was the quickest in over two years, according to the survey.
Indonesia’s annual inflation rose by 2,79 percent in August, compared to 3,21 in July, the Central Statistics Agency (BPS) reported. Excluding administered and volatile food prices, the country’s core inflation rose by 3,32 percent annually in the period, compared to 3,49 percent previously. De Lima predicts that Indonesia’s gross domestic product (GDP) will likely increase to 5,1 percent this year, compared to 4,8 percent in 2015, on the back of lowered interest rates that support private consumption.