Jakarta. Indonesia's manufacturing industry was contracted for the third straight month in December amid a steep decline in new orders from abroad, the Nikkei Indonesia Manufacturing purchasing managers' index survey revealed on Tuesday (03/01).
The PMI — a composite of manufacturing output, new orders, exports and employment measures to give a snapshot of manufacturing business conditions — plunged to 49 in December, down from 49.7 in November. Any readings below 50 indicate an overall decrease while any figure above 50 indicate an overall increase.
"December PMI data suggest that the Indonesian manufacturing industry moved away from stabilization at the end of 2016," Pollyanna De Lima, an economist at IHS Markit, said in a note.
De Lima underlined that companies remain on a "cautious footing" as indicated by the further falls in inventories and employment.
"A steep drop in new export orders contributed to a faster overall decline in new business, with the domestic market also a source of weakness," she said.
Survey participants said output levels fell at a faster rate in December, the quickest seen since July, as incoming new orders also continued its decrease. It also pointed out that December has the steepest monthly fall in new business from abroad since October.
As the manufacturers coped with less work, backlogs continued to deplete and the employment fell during the month.
"The sector’s labor market continued to suffer as job cuts have now been seen for three months in a row," De Lima said.
Manufacturers also suffered from an increase in material costs in general on the back of the impact from strong US dollar against import prices and slight increase in the average length of delivery times in December due to some suppliers postponed deliveries to wait for more orders.