Indonesian Production Increases for Third Month Running

Steven Bobson, Europe & Americas Editor
October 01, 2012 /

Output in the Indonesian manufacturing sector increased moderately during September. However, new order growth was the slowest in three months and new export orders continued to fall. With workforces contracting, backlogs of work were accumulated.

Whereas pre-production inventories increased, stocks of finished goods were depleted. Meanwhile, input and
output price inflation persisted in the latest month. The headline figure derived from the survey is the
Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month while readings below 50.0 show a deterioration. The PMI is composed of five sub-indices tracking changes in new orders, output, employment, suppliers’ delivery times and stocks of purchases.

The PMI posted 50.5 in September, down from the reading of 51.6 in August. Although the health of the Indonesian manufacturing sector continued to improve, latest data pointed to a slowdown from the previous month.

Su Sian Lim, ASEAN Economist at HSBC said: “The September PMI suggests only a slight expansion in manufacturing activity, a marked slowdown from August’s 10-month high. But there is still cause for
optimism. Backlogs of work rose for the first time on record. And while employment contracted for the first
time in four months, this owed to resignations rather than lay-offs. Lastly, manufacturers continue to be able to pass on higher costs to consumers, with both input and output prices still on the rise.”

Output increased for the third month running amid reports of stronger demand. However, the rate of expansion was only slight and slower than August’s 10-month high. Order book volumes also grew at a slower pace, with panellists linking recent rises to increasing marketing and the launch of new products. The global economic downturn continued to affect Indonesian exports, with some reports of falling orders from Europe and Japan.

Workforces fell, ending a three-month sequence of job creation. That said, the pace of contraction was only slight and the vast majority (94%) of survey respondents signalled no change in employment from August.

Meanwhile, the volume of work-in-hand (but not yet completed) increased, following a stagnation in August. That said, the rate of accumulation was only slight.

Whereas pre-production inventories increased, stocks of finished goods were depleted. Manufacturers in Indonesia reportedly accumulated input inventories in order to meet rising demand. Stocks of purchases
increased for the third successive month, although the pace of expansion was only slight.

Moreover, postproduction inventories were depleted at a slight rate, ending a two-month sequence of growth.
Inflationary pressures persisted in the Indonesian goods-producing sector during August. According to
panellists, input costs rose in line with increasing raw material and commodity prices. Although substantial, the pace of inflation eased to the slowest since November 2011. Charges increased slightly, although inflation eased from the pace recorded in August.

Anecdotal evidence suggested that selling prices were increased in line with rising raw material costs. Purchasing activity increased for the third successive month. However, the rate of expansion was slower than
August’s five-month high.


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