JAKARTA: Collapsing demand and the fastest rise in factory-gate prices in nearly 13 years have sent Indonesia’s manufacturing sector into its sharpest contraction in a year at the close of the second quarter, according to the latest purchasing managers’ index (PMI) data.
The S&P Global Indonesia Manufacturing PMI plunged to 46.9 in June from 50 in May, which is also the threshold that separates expansion from contraction, signalling a fresh decline in the health of the goods-producing sector.
A renewed decline in new orders drove the slump, with total demand falling for the first time in three months and at the fastest pace in a year.
Panel members attributed the weakness to eroding consumer purchasing power, as persistent price pressures choked off demand.
The decline in new export orders was equally grim, recording the steepest drop since August 2021 as higher prices made Indonesian goods less competitive in international markets.
Production volumes contracted for a fourth consecutive month, falling at a rate not seen since April 2025.
Manufacturers responded by slashing workforce numbers and reducing purchasing activity.
The pace of job shedding was the most severe since September 2021, while input buying fell for the fourth month in a row, and at the sharpest rate in nearly five years.
Compounding the sector’s woes, cost pressures remained historically elevated.
Input price inflation accelerated to its most pronounced level since September 2013, registering the second-highest rate in the survey’s history.
Manufacturers widely cited surging raw material prices as the primary driver.
Confederation of Indonesian Trade Unions president Said Iqbal said in May that soaring production costs resulting from the Iran war had forced manufacturing companies across Java to downsize or permanently shut down operations.
“The health of the Indonesian manufacturing sector deteriorated for the second time in the past three months to close the first half of 2026,” Usamah Bhatti, an economist at S&P Global Market Intel- ligence, said in the report. — The Jakarta Post/ANN
