JAKARTA: Indonesia’s manufacturing activity stagnated in March amid declining output and demand, as the United States-Israeli war on Iran put pressure on prices and supplies of raw materials.
A monthly survey by S&P Global published on Wednesday showed Indonesia’s headline purchasing manager’s index (PMI) slid from 53.8 in February to 50.1 last month, slightly above the 50-point threshold that separates expansion from contraction.
The report said the drop indicated a “broad stagnation in operating conditions”.
“March’s survey data indicated renewed downturns in both output and new order intakes in the Indonesian manufacturing sector, with the former falling at the steepest rate in nine months.
The fall in demand meanwhile was also attributed to a sharp reversal in new export demand, which fell at the steepest rate since last November,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
The drop in manufacturing growth is consistent with trends in other Asian countries, including the Philippines, Vietnam, Taiwan and Japan.
In China, the PMI figure continued to expand in March for the fourth consecutive month, though inflationary pressures and supply chain challenges are intensifying.
While the PMI report for Indonesia noted the rate of decline in production level as modest, it was the steepest since June 2025, primarily driven by the material supply crunch and rising material prices amid the Middle East war and turbulence in the global economy.
The report also indicated that, for the first time in eight months, there was a moderation in new order volumes, with manufacturers citing subdued demand and higher competition as having weighed on new business intakes.
Muted demand has translated into falling backlogs for the first time since last October and reduced sales led to a further increase in post-production inventories, as unsold products were held in stock.
Firms have reduced employment levels for the second time in three months, while purchasing activity dropped for the first time since July 2025 due to higher material prices and supply shortages.
Manufacturing companies have also faced shipping delays following the outbreak of the war in the Middle East, recording the most pronounced delivery delays since October 2021.
These issues have pushed cost inflation to the highest in two years, with firms seeking to pass the higher input costs on to clients by raising factory gate charges to the greatest extent since June 2022.
“Manufacturers remain confident that output will rise over the year.
“That said, March data highlights the vulnerability of Indonesia’s manufacturing economy to the war, notably from a price and supply front,” said Usamah.
The degree of confidence among Indonesian manufacturers ticked up from February, though the sentiment was below average.
The optimism was underpinned by hopes that demand would resume its upward path and that there would be no further intensification of conflict in the Middle East.
The Industry Ministry’s Business Confidence Index also dropped to 51.86 points in March from 54.02 in February. — The Jakarta Post/ANN
