Indonesia's manufacturing PMI hits four-month high in July

JAKARTA – Indonesia's manufacturing activity returned to expansion territory in July 2026 after contracting over the previous few months.

S&P Global reported that Indonesia's Manufacturing Purchasing Managers' Index (PMI) rose to 50.2 in July 2026 from 46.9 in June, marking its highest level in the past four months.

According to the S&P Global report, the improvement was driven by a recovery in production volumes, which increased after declining for four consecutive months. However, the pace of output growth remained modest.

Despite the recovery, S&P Global said stronger demand also supported the increase in production, although the pace of expansion continued to be constrained by rising prices.

New orders were broadly stable after contracting in June. Some companies reported higher sales, supported by improving consumer confidence and the launch of new projects.

Usamah Bhatti, economist at S&P Global Market Intelligence, said the stabilisation in new orders helped return Indonesia's manufacturing sector to positive growth.

"Companies are seeing signs that customer confidence is beginning to strengthen, although stronger expansion remains somewhat constrained," Bhatti said in the report.

He added that inflation in raw material costs has begun to show signs of easing. Input cost inflation slowed to its lowest level in four months in July, although it remained above its historical average.

Meanwhile, manufacturers increased employment for the first time in five months. The pace of hiring, however, remained modest after four consecutive months of job losses.

Manufacturers' inventories of raw materials also declined as companies adjusted stock levels to match demand conditions. Some firms chose not to replenish inventories while new order volumes remained limited.

"Companies recorded their highest level of confidence in six months, supported by expectations of stronger sales growth and improving customer confidence," Bhatti added.

Bhatti said manufacturers remain hopeful that price pressures will continue to ease, supporting further growth in the sector. However, developments in the Middle East are expected to remain a key factor influencing price pressures over the coming months. (KR/ZH)