Indonesia Manufacturing PMI fell nearly four points from 50.8 in August to 47.2, marking the index' first decline since April, at the time the global pandemic peaked - Photo by Pixabay

JAKARTA (TheInsiderStories) – The latest Purchasing Managers Index (PMI) survey data showed conditions in the manufacturing sector in Indonesia worsened at the start of the quarter fourth. Production and demand just dropped back in the middle of countermeasures ongoing to control the spread of the COVID-19.

Faced with falling demand, the company continue to reduce the number of their employees, by the number of reports redundancy. Consequently, purchasing activity and inventory levels as well minus. Price data shows greater margin pressure, because the input price continues to increase while the output load decreases the first time in seven months.

IHS Markit reported, Indonesia Manufacturing PMI  rose slightly from the position of 47.2 in September to 47.8 at October. However, with a position that is still below 50.0, the latest data showing a further deterioration in conditions health sector

Large-scale social restrictions in Jakarta are relaxed in mid-October so it only gives a little a boost to the manufacturing sector. Production volume experienced contraction for two consecutive months in October, although the rate of decline began to decrease to reach a more rapid rate slow.

As with output, the inflow of new orders decreases at a slower rate. Meanwhile, external demand continues to weaken at a substantial rate. The respondents emphasized that the impact of the pandemic continues to exacerbate demand conditions overall.

With weak sales and lowering requirements production, the company highlighted the visible excess capacity of the backlog of work continues to decline. To control costs to keep the company afloat, the company continues reduced the number of employees in October.

Employment decreased during the eight months running, with job vacancies increased as redundancy was reported on a large scale in various companies. Purchasing and inventory activities too minus in response to falling sales. However, a purchase input fell to its lowest in an eight month period of decline.

Stock buybacks have decreased, as has happened to every month during 2020. Post-production inventories are decreasing for four consecutive months. The supply chain is still under pressure. Delivery time extended for nine consecutive months, with rates extension is the same as in September and is classified as moderate overall.

Input distribution reportedly affected by COVID-19, bad weather, and labor demonstrations. Meanwhile, input prices continued to rise in October, with increase in the inflation rate from September. Anecdotal evidence indicates an increase in the price of raw materials, including base metals, chemicals, plastics, and some foodstuffs, which are encouraging cost increase.

However, the company reduced the selling price them, marking the first drop in output costs since months March. Finally, expectations regarding output in the coming year continue to rise to the highest position for nearly a year and a half, with self-confidence based primarily on the expectation that conditions the market will return to normal.

Responding to the latest survey results, Bernard Aw, Chief Economist at IHS Markit, said, “The latest PMI data shows a decline in the manufacturing sector in Indonesia at the start of the fourth quarter, by level production and sales continued to decline. Indonesian producers of goods continue to fight weak demand, rising surcharges and ongoing restrictions related to COVID-19.

As a result, he continued, they must reduce capacity and investment in order to do so continue to hold on. Number of employees, purchasing inputs, and inventory all continued to be reduced in October.

In addition, said Aw, the impact of the large-scale social distancing easing in the middle of the month October will only be visible in November. However, uncertainty over the progress of this pandemic as well the absence of an effective vaccine can curb demand and economic activity remains sluggish in the months ahead.

Edited by Editorial Staff, Email: theinsiderstories@gmail.com