The purchasing managers index (PMI) survey of Indonesia slightly up to 46.9 in July from the previous month 39.1, IHS Markit reported on Monday (08/03) - Photo by Hino Motor Indonesia

JAKARTA (TheInsiderStories) – The purchasing managers index (PMI) survey of Indonesia slightly up to 46.9 in July from the previous month 39.1, IHS Markit reported on Monday (08/03). It said, after four months of very sharp decline, new order inflows fell marginally at the beginning of the third quarter, while output fell at a much slower rate.

IHS’ chief economist, Bernard Aw, said the easing of the contraction in Indonesia’ manufacturing sector added to hopes that the worst impact of the pandemic had passed. The index of output, demand and employment all rose from lows at the beginning of the second quarter, helped by the relaxation of the large-scale social restriction.

But the latest data in July, he continued, showed that the Indonesian PMI has remained below 50.0 without change and indicates a further decline in the sector. He also acknowledge, Indonesian producers continue the adverse effects of the COVID-19 on the economic activity.

The company also remains reluctant to invest in a new capacity, with declining employment conditions and reduced purchasing activities. Inventory is also shrinking, said Aw.

Last July, Bank Indonesia (BI) reported the manufacturing Industry sector records a deeper contraction phase in the second quarter (2Q) of 2020. This is reflected in the Prompt Manufacturing Index (PMI) at 28.55 percent or down from 45.64 percent in the 1Q of 2020 and 52.66 percent compared to last year.

“The contraction occurred in all components, with the deepest comes from the production volume component in line with declining demand as a result of the COVID-19 pandemic,” the central bank said in a statement.

By sector, all sub-sector recorded the contractions in the 3Q, with the deepest contractions in textile, leather goods and footwear. The central bank sees the improvement in the 3Q is still in a contraction phase at 45.72, supported by the index component of the total volume of orders and production volumes.

Minister of Industry, Agus G. Kartasasmita, pointed out that the industry was the biggest contributor to the country’ gross domestic product, around 19.98 percent in the 1Q of the year. To maintain the manufacturing sector’ performance, the ministry has supported industries to continue operations by applying the industrial operation and mobility license and adhering the health protocols.

The ministry had issued over 17 thousand to ensure that five million workers could continue to work. In addition to the economic stimulus for reviving the industrial sector amid the COVID-19, the government has readied various incentives for investors.

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