Indonesian Manufacturing Falls Back in October: Survey
Jakarta. Indonesia's manufacturing industry contracted in October as falling order led businesses to lower output, scale down input buying levels and cut back on employment, a Nikkei Indonesia Manufacturing purchasing managers' index survey revealed.
The index, abbreviated as PMI, is a composite reading of manufacturing output, new orders, exports and employment measures and gives a snapshot of manufacturing business condition. It dropped to 48.7 in October, from 50.9 in September.
Any reading below 50 indicates an overall downturn while figures above 50 indicate an overall improvement.
This was the first contraction after two consecutive months of expansion — a reality check for hopes of a manufacturing recovery this year.
"Bleak demand was the culprit, with firms reporting falls in both domestic and external markets," Pollyanna De Lima, an economist at IHS Markit, said in a statement on Tuesday (01/11).
October was harsh for the industry as new orders declined due to weak demand and bad weather. Weak external demand also forced businesses to scale down production and lay off workers.
Factory output, consequently, also fell in October.
The survey pointed out that input costs and factory gate charges — the cost of manufacturing goods, including labor cost, raw material, energy and other indirect costs such as loan interest, maintenance cost and rent before any markup to give profit — rose at slower rates, weaker than their long-run averages.
Manufacturers faced higher cost burdens for oil, chemicals, plastics, rubber and paper.
De Lima said manufacturing growth may resume near the end of the year in light of Bank Indonesia's decision to ease monetary policy for two consecutive months.
The central bank cut its benchmark rate — dubbed the seven-day reverse repo rate — by 25 basis points last month to 4.75 percent, following another 25-basis point cut in September as part of a concerted effort to lower banks' interest rates and spur the economy.
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