Indonesia Manufacturing Purchasing Managers' Index climbed to 51.3 in December from the previous month at 50.6 in November - Photo by Hyflux

JAKARTA (TheInsiderStories) –  Indonesia Manufacturing Purchasing Managers’ Index (PMI) climbed to 51.3 in December from the previous month at 50.6, IHS Markit reported today (01/04). The data shows a moderate improvement in business conditions and at the highest for ten months period.

Operational conditions were driven by a sharper increase in new orders, which were up for the two months running. Panelists reported signs of increasing demand due to pandemic disruption COVID-19 is decreasing. However, export orders just dropped sharply.

The agency said, the growth in total new business supports a second increase in output consecutively at the end of 2020. Although down from November, expansion rate is still solid and is the second fastest in survey history. The increase in output is achieved despite the reduction employment.

While, staff levels decreased for ten consecutive months, although at the lowest pace in this period. Manpower continues to be reduced in line with the capacity space sector, although there has been an increase recently in a new order. Work buildup decreases with speed solid.

Responding to the latest survey results, Andrew Harker, director of economics at IHS Markit said, “Indonesian companies in general have a positive ending to 2020, with the most recent PMI data showing an increase of two consecutive months on output and new orders.”

But, he rated, the road still long considering the severe disruption caused by the pandemic and manufacturers are at least confident in the prospects for 2021. He continued, from a less positive perspective, the level of capacity in the sector so low that there is a decline in employment further, while widespread supply chain disruption hinder efforts to secure raw materials.

Company hope that this area will show signs of improvement at the beginning of 2021,” he noted.

In addition, said Harker, purchasing activity was relatively stable in December due to quantity firms increase input purchases as they increase new order. Other companies experienced a decline in purchases in the middle difficulty in finding raw materials. This raw material security problem can be seen in the delivery time data suppliers who extended to a maximum period of seven month.

COVID-19 restrictions and certain difficulties in importing the goods mentioned by the panel members, he adds. Lack of raw materials causes input prices to rise sharply and fast. In addition, the rate of input cost inflation accelerated to its sharpest since November 2018.

Output prices are also rising at the fastest pace, and it is one that is the fastest in 19 months because the company is charging input costs higher to the consumer. Stocks of purchases and returns decline at the end of 2020, with both dropping at a moderate rate. Inventory decline rate preproduction was reduced for eight consecutive months and was classified weakest since February.

Manufacturing in Indonesia remains confident that output will rise as long as the coming year, although sentiment eased slightly on the month December. Optimism centers on predictions of an increase in new orders further and hope that the COVID-19 pandemic will subside

Commenting the PMI data, industry minister, Agus Gumiwang Kartasasmita, emphasized that Indonesia has sufficiently strong capital to be able to enter the stage of economic recovery. This can be seen from the journey of the national economy during 2020.

The domestic economy experienced a rock bottom in the second quarter of 2020, especially when the country was declared to have experienced a pandemic outbreak for the first time. However, in the third quarter of 2020, it began to improve, although it still contracted at 3.4 percent in annual basis.

Other supportive macroeconomics included the improving domestic demand and consumer confidence. He added, there are three projected sub-sectors that are able to record a better growth in 2021, namely food, beverage, paper, and paper goods industry. The beverage industry, for an example, could grow 4.39 percent annually in 2021, adds by the minister.

In addition, said Kartasasmita, his office also will pay special attention to several manufacturing sectors, such as the pharmaceutical industry, medicinal products, chemicals, traditional medicines, chemicals, goods from chemicals, basic metals, and food. This year, industrial growth is expected to return to a positive path.

“Assuming the pandemic can be controlled and economic activity can recover, we project that the growth of the manufacturing industry in 2021 will grow by 3.95 percent,” he explained.

This optimism is consistent with investment in the non-oil and gas processing industry, which is still growing positively. Throughout 2020, the investment value of the non-oil and gas processing industry is estimated to reach Rp265.28 trillion (US$18.95 billion) or jumped 24.48 percent from 2019 amounting to Rp213.11 trillion. This year, investment is projected to rise 21.97 percent to Rp323.56 trillion.

US$1: Rp14,000

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