Jakarta – Indonesia's manufacturing industry showed a marked improvement in March from a month earlier as companies scaled up production to meet new orders, the Nikkei Indonesia Manufacturing purchasing managers' index survey revealed.

"Rates of expansion were only marginal, however, as growth is still being hampered by strong cost increases," Pollyanna De Lima, an economist with London-based financial services company IHS Markit, said on Monday (03/04).

The PMI – a composite of manufacturing output, new orders, exports and employment measures to give a snapshot of manufacturing business conditions – increased to 50.5 in March, up from 49.3 in February. Any PMI reading above 50 indicates an overall increase in manufacturing output.

According to De Lima, the first quarter in 2017 was "bumpy for businesses" despite an average reading of 50, a figure slightly higher than last year's final quarter reading of 49.1

Despite higher business inflows, new export orders decreased in the first quarter while backlog depletion slowed to its weakest rate since June last year.

Employment continued to decrease in March since October last year, while ancillary evidence of lower workforce numbers reflected "weak gains in new business and relatively subdued demand."

Buying levels increased marginally this month for the first time since November last year, due to greater output needs and inventories, while finished items and pre-production holdings decreased.

"Higher global commodity prices and a weaker rupiah against the US dollar served to discourage suppliers from building up their stocks and subsequently resulted in shortages of some raw materials," De Lima said.

Still, manufacturers remain optimistic about the year's economic outlook, De Lima said. Panelists highlighted new products launching, greater advertising and improved productivity as factors to support higher output rates.

Source: http://jakartaglobe.id/business/manufacturing-industry-produces-march-optimistic-year-ahead/