Indonesia’s Manufacturing Activity Shrinks for 7th Straight Month in April
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Indonesia’s manufacturing activity shrank for the seventh straight month in April as export orders continued to decline and domestic demand remained weak, an HSBC Markit survey showed on Monday.
The purchasing manager’s index (PMI) rose slightly to 46.7 in April from 46.4 in March — the lowest reading since surveys began in April 2011 — but remained well below 50, the level separating contraction from expansion.
“April’s PMI survey highlights the current fragility of the Indonesian manufacturing sector, with both the domestic and export markets sources of weakness,” said Pollyanna De Lima, economist at Markit.
“Despite the weaker rupiah, businesses struggled to price competitively at a global level as the cost of imported raw materials increased.”
Output continued to fall as incoming new work slowed, and poor weather hampered activity. As a result, employers shed staff for the ninth straight month.
“Companies continued to trim employment, buying levels and pre-production inventories, highlighting an expectation that conditions will remain tough in the near future,” De Lima added.
Producers also reported increasing inventories in April. The seasonally adjusted stocks of finished goods index rose to the highest reading since the first month of data collection.
Questions & Answers
Q.What specifically caused Indonesian manufacturing activity to shrink in April?
What specifically caused Indonesian manufacturing activity to shrink in April?
Export orders continued to decline, and domestic demand remained weak. Poor weather also hampered activity, contributing to the sector's fragility during the month.
Q.How did the weaker rupiah affect Indonesian manufacturers in the global market?
How did the weaker rupiah affect Indonesian manufacturers in the global market?
Despite the weaker currency, businesses found it difficult to price competitively internationally. This was because the cost of raw materials imported into the country had increased.
Q.What measures did companies take in response to the continued difficult conditions?
What measures did companies take in response to the continued difficult conditions?
Companies continued to reduce staff levels for the ninth consecutive month. They also trimmed buying levels and pre-production inventories, indicating expectations of ongoing tough conditions.
Q.What was the significance of the PMI reading for March 2011?
What was the significance of the PMI reading for March 2011?
March's PMI reading of 46.4 was the lowest recorded since the surveys first began in April 2011. This indicates a significant and prolonged period of contraction.