JAKARTA - The latest S&P Global data shows operating conditions across Indonesia's manufacturing sector improved at a stronger pace for three months in July 2022. Indonesia's Manufacturing Purchasing Managers' Index (PMI) in the period reached 51.3, up from 50.2 in the previous month. Indonesia's Manufacturing PMI rose amid the decline in the index in other Asian countries, especially China, which fell from 51.7 in June 2022 to 50.4 in July 2022.
Indonesia's manufacturing PMI figures in July 2022 tend to be higher than other ASEAN countries. In the same period, only Indonesia and Malaysia experienced an increase in PMI from the previous month. Malaysia's manufacturing PMI rose from 50.4 in June 2022 to 50.6. Several countries experienced a decline, such as Vietnam which fell from 54.0 to 51.2, and the Philippines also fell from 53.8 to 50.8. Meanwhile, other Asian countries such as South Korea fell from 51.3 to 49.8, while Taiwan from 49.8 fell to 44.6.
The increase in Indonesia's manufacturing PMI was supported by rising domestic demand which affected the increase in the workforce at the sharpest pace in a period of more than eleven years of PMI data collection. This condition was supported by reported inflationary pressures that eased at the beginning of the third quarter as well as higher input costs and lower output costs for more than a year. The increase in the manufacturing PMI last July strengthened the level of optimism in manufacturing companies regarding output forecasts for the next 12 months. According to S&P Global's release, the higher expectations were supported by expectations of price stability and an increase in new orders.
The Minister of Industry added that the increase in Indonesia's manufacturing PMI compared to other countries was supported by an increase in domestic demand, including household consumption, government spending, and inter-sectoral spending. Among the three, the rate of increase in government spending driven by the Program for Increasing the Use of Domestic Products (P3DN) showed the largest increase. An increase in government orders for manufactured products, especially in the textile and textile products (TPT) sector, as well as electronic machinery and equipment.
The government targets Rp400 trillion of total central and local government spending to be absorbed by domestic products and Micro, Small and Medium Enterprises (MSMEs). Meanwhile, the Ministry of Industry supports the P3DN program through facilitation of Domestic Component Level (TKDN) certification for domestic industrial companies with a total of 1,250 product certificates in 2022. (LM)