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Indonesian manufacturing slows down as demand fizzles further
Indonesian manufacturing slows down as demand fizzles further

The Star

time02-07-2025

  • Business
  • The Star

Indonesian manufacturing slows down as demand fizzles further

JAKARTA: Indonesian manufacturers remain pessimistic about growth prospects as softening domestic demand continued to drag on output, purchasing and employment in June, which experts have cited as signs of the declining health of the goods-producing sector The country's manufacturing Purchasing Managers' Index (PMI) slipped to 46.9 in June from 47.4 in May, marking its second-lowest reading since August 2021, behind April, of this year. It was also the third consecutive month the index has remained below the 50-point threshold that separates expansion from contraction. The decline reflected a sharper drop in new orders and production, with the fall in sales driven primarily by domestic customers. Export orders, meanwhile, remained broadly unchanged after two straight months of contraction. 'The reduction in sales was largely domestic-driven, as export sales stabilized on the month,' said Usamah Bhatti, economist at S&P Global Market Intelligence, in the release published on Tuesday (July 1). 'The malaise in total new orders prompted firms to enter retrenchment mode as they sought to reduce employment levels and purchasing activity.' Firms also scaled back in hiring, with employment shrinking for the second time in three months and at the sharpest pace in nearly four years, the report noted. Looking ahead, manufacturers grew less bullish with output expectations falling to an eight-month low and below the long-run average amid concerns over global conditions and potential spillovers into Indonesia's industrial sector, Bhatti noted. Manpower Minister Yassierli announced in May that 24,036 people had been laid off nationwide in the first four months of this year due to various reasons including bankruptcy, downsizing and relocation. The figure marked an increase compared to the same period last year, given that the current figure was more than a third of the full-year tally of 77,965 people in 2024. Said Iqbal, the chairman of the Confederation of Indonesian Trade Unions (KSPI), claimed the figure was higher, with 60,000 workers laid off in the first two months of this year alone. He attributed the discrepancy to differences in classification systems. Signs of a slowdown in local manufacturing are also reflected in the Industry Ministry's Industrial Confidence Index (IKI), which has declined over the past three months, though it remains in expansion territory above 50. Notably, while the PMI indicated a slight rebound in June from April's low point, the IKI dipped further to 51.84 in June, down from 51.9 in April, suggesting waning industry optimism. Industry Ministry spokesperson Febri Hendri Antoni Arief said on Tuesday that two key factors were behind the continued contraction in the country's manufacturing activity, which are uncertainty over pro-business policies and weakening demand in both export and domestic markets, compounded by declining household purchasing power. Furthermore, government spending on manufactured goods only began to ramp up in mid-June, he added, which also driven in part by a newly launched fiscal stimulus program tied to the school holiday season. The incentive package is expected to benefit food and beverage producers, as well as textile and garment manufacturers. He said many manufacturers were holding off on expansion in June while awaiting government measures aimed at protecting local industries, particularly policies that would shield the domestic market from a surge in cheap imported finished goods. 'We expect the impact of the import relaxation rollback, especially on textile products, apparel and accessories, to begin materializing in the next two months,' Febri said in a statement. Private lender Bank Permata chief economist Josua Pardede said the downtrend on manufacturing activity would be likely to persist in the short to medium term if household purchasing power and consumer confidence do not recover. 'This condition is reinforced by the decline in the business confidence index to an eight-month low, reflecting heightened uncertainty and manufacturers' concern about the economic outlook,' Josua told The Jakarta Post on Tuesday. He further warned that the sustained drop in employment signals efficiency measures in response to falling demand, and, if prolonged, could lead to structural unemployment that further weakens consumer spending, creating a vicious cycle of subdued domestic demand. 'Without significant policy intervention, such as fiscal stimulus or expansionary measures from Bank Indonesia to support purchasing power, domestic demand risks remaining weak and may weigh further on the manufacturing recovery,' Josua continued, adding that weakening demand and falling employment could ultimately derail broader national growth targets. Despite a contracting PMI, imports grew for the fourth consecutive month to 4.14 per cent year-on-year (yoy), which indicate stable domestic demand and preemptive inventory building, Hosianna Evalita Situmorang, an economist at private lender Bank Danamon, said in a statement on Tuesday. Imports climbed to $20.31 billion led by increases in capital and consumer goods, with the former surging 24.85 per cent yoy and the latter ticking up 5.28 per cent. In contrast, imports of intermediate goods fell 1.18 percent, in line with the continued slump in domestic manufacturing activity. Hosianna cautioned that if the downward trend in manufacturing continues into the third quarter, it could drag the country's economic growth below the 5 per cent threshold, especially given that the manufacturing sector accounts for roughly 18 per cent of the country's gross domestic product. 'A prolonged contraction in output would also weigh on non-commodity exports,' she continued, 'which could ultimately erode the trade surplus.' BPS data show that currently the national economy grew 4.87 per cent in the first quarter from a year earlier, marking the slowest pace in over three years, while also hovering below the usual 5 per cent rate the country has achieved for years. - The Jakarta Post/ANN

Manufacturing edges closer to stabilisation
Manufacturing edges closer to stabilisation

The Star

time02-07-2025

  • Business
  • The Star

Manufacturing edges closer to stabilisation

The seasonally adjusted S&P Global Malaysia manufacturing PMI rose to 49.3 in June, up from 48.8 in May. KUALA LUMPUR: Business conditions in the manufacturing sector moved closer to stabilisation at the end of the first half of 2025, according to S&P Global Market Intelligence. In a note, the firm said the latest S&P Global Malaysia manufacturing purchasing managers' index (PMI) reading suggested that the modest growth seen in official gross domestic product in the first quarter of 2025 was sustained into the second quarter. 'The data also suggests that the expansion in manufacturing production continued throughout the second quarter,' it said. The seasonally adjusted S&P Global Malaysia manufacturing PMI rose to 49.3 in June, up from 48.8 in May. S&P Global economist Usamah Bhatti said June data indicated a gradual move towards stabilisation in the health of the Malaysian manufacturing sector, although operating conditions remained challenging. — Bernama

Manufacturers hike prices as rising costs test Malaysia's fragile recovery
Manufacturers hike prices as rising costs test Malaysia's fragile recovery

Yahoo

time01-07-2025

  • Business
  • Yahoo

Manufacturers hike prices as rising costs test Malaysia's fragile recovery

KUALA LUMPUR, 1 July — Malaysia's manufacturers faced growing cost pressures in June, with input prices rising at the fastest pace in seven months. The S&P Global Malaysia Manufacturing PMI ticked up to 49.3, signalling a softer moderation in business activity. While the index remained below the neutral 50.0 level, it marked the sector's strongest performance since February. 'June data indicated a gradual move to stabilisation in the health of the Malaysian manufacturing sector, although operating conditions remained challenging,' Usamah Bhatti, economist at S&P Global Market Intelligence, said. 'Firms recorded sustained, albeit softer moderations in demand and production that were the softest in four months.' However, manufacturers cited higher raw material costs and an unfavourable exchange rate as key reasons behind the rise in input costs. In response, firms raised selling prices for the first time in half a year, with output charges rising the most since August 2024. The inflationary pressures came despite a continued softening in both output and new order volumes. Export demand also fell, but at the slowest rate since the downturn began in December, slightly easing the overall sales decline. Staffing levels rose marginally, ending a nine-month stretch of job cuts in the manufacturing sector. Inventories of finished goods were further drawn down, indicating that businesses remained cautious about future demand. Purchasing activity remained weak, extending a decline that has lasted for nearly three years. Supplier delivery times lengthened for the first time in three months, adding to concerns about supply chain stability. Firms remained modestly optimistic about future output, banking on new product launches despite global economic headwinds.

Malaysia's manufacturing edges closer to stabilisation in 1H25 - S&P500
Malaysia's manufacturing edges closer to stabilisation in 1H25 - S&P500

The Star

time01-07-2025

  • Business
  • The Star

Malaysia's manufacturing edges closer to stabilisation in 1H25 - S&P500

KUALA LUMPUR: Business conditions in the Malaysian manufacturing sector moved closer to stabilisation at the end of the first half of 2025, according to S&P Global Market Intelligence. In a note today, the firm said the latest S&P Global Malaysia manufacturing purchasing managers' index (PMI) reading suggests that the modest growth seen in official gross domestic product (GDP) statistics in the first quarter of 2025 was sustained into the second quarter. "The data also suggests that the expansion in manufacturing production continued throughout the second quarter,' it said. The seasonally adjusted S&P Global Malaysia manufacturing PMI rose to 49.3 in June, up from 48.8 in May. S&P Global economist Usamah Bhatti said June data indicated a gradual move towards stabilisation in the health of the Malaysian manufacturing sector, although operating conditions remained challenging. "Firms recorded sustained, albeit softer, moderations in demand and production - the softest in four months. Most encouragingly, firms raised their employment levels for the first time since last September. "That said, concerns were raised on the price front, with manufacturers recording the steepest increase in input prices for seven months. "In response, firms lifted their charges to the greatest extent in nearly a year in a bid to protect margins,' he said in a statement today. According to S&P Global, there was also a softer reduction in new export orders, while businesses signalled a renewed rise in employment during June. "Business confidence, meanwhile, was positive but remained well below the series average. "On the price front, input cost inflation gathered pace from May to reach the highest in seven months. In turn, firms signalled the strongest rise in output charges since August 2024,' it said. - Bernama

Modest recovery seen in manufacturing sector
Modest recovery seen in manufacturing sector

New Straits Times

time01-07-2025

  • Business
  • New Straits Times

Modest recovery seen in manufacturing sector

KUALA LUMPUR: Business conditions in the Malaysian manufacturing sector moved closer to stabilisation at the end of the first half of 2025, according to S&P Global. Usamah Bhatti, an economist at S&P Global Market Intelligence, said June data indicated a gradual move to stabilisation in the health of the Malaysian manufacturing sector, although operating conditions remained challenging. Bhatti said firms recorded sustained, albeit softer, moderations in demand and production that were the mildest in four months. "Most encouragingly, firms raised their employment levels for the first time since last September. "That said, concerns were raised on the price front, with manufacturers recording the steepest increase in input prices for seven months. "In response, firms lifted their charges to the greatest extent in nearly a year in a bid to protect margins," he said in a note. According to the latest data released by S&P Global, the seasonally adjusted S&P Global Malaysia Manufacturing Purchasing Managers' Index (PMI) posted 49.3 in June, up from 48.8 in May. Coming in only marginally below the neutral 50.0 threshold, the index signalled that business conditions moved closer to stabilisation over the course of the month. In fact, the PMI was at its highest reading since February. The latest PMI reading suggests that the modest growth in official gross domestic product statistics in the first quarter of 2025 was sustained into the second quarter. The data also suggest that the expansion in manufacturing production continued throughout the second quarter. Overall, the report suggests that optimism regarding the 12-month outlook for output improved only slightly during June. It noted that the overall degree of optimism was modest but well below the series average. "Firms were confident that new product launches would help stimulate sales and production, though firms highlighted concerns regarding the health of the global economy," it added.

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