Indonesian manufacturing index during the third quarter (3Q) of 2019 did not indicate an improvement - Photo: Privacy

JAKARTA (TheInsiderStories) – The average Purchasing Manufacturing Index (PMI) of Indonesia in third quarter (3Q) of 2019 not indicated an improvement, IHS Markit reported yesterday (10/02). The index was only 49.2, which is the lowest achievement since the end of 2016.

But in September only, the PMI stood at 49.1, rose slightly compared to August 2019 at 49. Overalls demand continues to decline. This reflected in the total flow of new requests, which declined for two consecutive months. This is even the sharpest decline since July 2017.

Weak domestic and external demand causes the production continues to declined, as the companies adjust operations amid a decline in sales. In fact, the lowering output was the most striking in the last 21 months. As a result, the number of workers dropped for three consecutive months and is the fastest since the end of 2017.

When viewed in term of prices, producers take finesse by lowering selling prices so that sales rise. Output costs were also seen to fall in September 2019, even for the first time in three years.

Overall price pressures did not change because input prices rose marginally at the end of the 3Q of this year. But there is an increase in the price of raw materials, such as plastic, paper, cloth, and also some types of food.

While, the influenced country, United States (US) PMI getting worst since June 2009′ Great Recession, fell to 47.8 percent from prior month at 49.1 percent, data from the Institute for Supply Management shown. The sharply decline in the index raised the specter of recession, wiping out early Wall Street gains and sending stocks lower.

Readings over 50 percent signal business conditions are getting better, below 50 percent indicates they are getting worse. President Donald Trump quickly took to Twitter to blast the Federal Reserve again, blaming the central bank for keeping interest rates too high.

“As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!,” he said.

What happened is production, employment and inventories all declined in September. The index for new orders actually rose a tick to 47.3 percent, but it’s still at the weakest level in a decade. There is also another bad sign, only three of the 18 US manufacturing industries tracked by ISM reported growth, down from nine in the prior month.

In the bigger picture, manufacturers at home and abroad have faced waning demand and more canceled orders as they struggle to cope with a global economic slowdown, exacerbated in part by the trade war between the world’s two largest economies.

This manufacturing index also expected to affect Indonesia’s stock exchange index as well as its currency.

Written by Yosi Winosa, Email: Yosi@theinsiderstories.com