Indonesia manufacturing PMI shoots up in August, crosses 50-point mark

Indonesia’s manufacturing sector expanded during the month of August, crossing the 50-point mark, benefitted by higher inflows of new businesses and escalated buying levels during the month These factors pushed the sector back to growth trajectory, following July’s contraction, but however, failed to generate jobs.

Indonesia’s Nikkei manufacturing Purchasing Managers’ Index (PMI) jumped to 50.4 in August, compared to 48.4 in July. A PMI reading above 50 indicates expansion, while below the mark exhibits contraction.

Having decreased in July for the first time since February, order book volumes rose in August. The rate of expansion was moderate and above the average for the past six months. Concurrently, new export orders increased in August, thereby ending a 22-month sequence of contraction. However, the pace of expansion was marginal overall, Markit reported.

Moreover, the upturn in buying levels rebounded from the contraction witnessed during July, with the rate of expansion remaining solid and above the long-run average. Also, pre-production inventory levels rose at the quickest pace in almost two years.

"IHS Markit expects GDP growth in Indonesia to accelerate from the post-recession low of 4.8 percent in 2015 to 5.1 percent in 2016, with lower interest rates anticipated to support private consumption," said Pollyanna De Lima, Economist, HIS Markit.