Jakarta. Indonesia’s manufacturing sector expanded at a solid rate at the start of 2022, as demand was strong, with foreign sales increasing and putting more than a single ripple in the sector, the latest data from IHS Markit's Manufacturing Purchasing Manager Index showed on Wednesday.
The IHS Markit Indonesia Manufacturing Purchasing Manager's Index increased to 53.7 in January from 53.5 in December 2019. An index value above 50 reflects expansion compared to the previous month, while a value below that threshold signifies contraction.
This is a five-month streak of improving business conditions in the Indonesian manufacturing sector. The rate of improvement over this period has been the strongest since last November.
The PMI is a composite indicator based on five major indicators of economic activity in the manufacturing sector. The PMI is calculated by taking the average of five sub-indices, namely new orders, production, employment, supplier deliveries, and inventories of raw materials.
“Operating conditions in the Indonesian manufacturing sector improved at the start of 2022... Client demand expanded at a sharper rate, supported by record growth of new orders from abroad," Jingyi Pan, economics associate director at IHS Markit, said in a statement.
"Meanwhile, higher employment levels and purchasing activity were also seen, altogether reflecting better economic conditions.
“Suppliers’ delivery times notably improved following a two-year streak of deterioration, which was also a positive sign. It will be important to observe if things continue to take a turn for the better, as price pressures remain steep due to lingering supply issues.
“Overall business confidence eased in January, but firms remained positive about the 12-month outlook for production. IHS Markit forecasts that Indonesia’s GDP will expand by 4.9 percent in 2022,” Pan said.
Still, backlogs of work at the end of January had been piling up at a faster rate than in December. Many survey participants pointed out that higher demand and wait times caused an increase in outstanding work. On prices, input cost levels increased rapidly though inflation has been eased from its recent peak.
Indonesian manufacturers said that input prices have gone up due to supply shortages and higher transportation costs. Although input costs eased slightly, output prices went up sharply, much like last month.