Jakarta – Indonesia's key manufacturing sector indicator has climbed to a decade high last month as producers ramp up outputs following a rise in new orders while pausing downsizing their workforce as pressures on capacity began to appear.
The IHS Markit Indonesia Manufacturing Purchasing Managers' Index grew to 53.2 in March, from 50.9 in February. That was the highest reading since the index was first published in 2011. Any reading above 50 indicates expansion from the previous month. On the other hand, readings below 50 signal contraction.
"The Indonesian manufacturing sector ended the first quarter of the year on a high, with firms ramping up production in response to the strongest influx of new orders in the decade-long survey so far," Andrew Harker, economics director at IHS Markit, said in a statement on Thursday.
Many managers in the survey said production, which has increased for the fifth month in a row, followed the rise in new orders, thanks to stronger client demand.
As a result, the companies said they experienced pressure on the production capacity and had to pause the employment reduction, following 12 successive months of downsizing.
"Signs of pressure on capacity meant that employment stabilized in March, and if trends in workloads remain positive, we can expect outright employment growth in the near future," Harker said.
The managers said they also confident the recovery would continue and sustain the increase in output. IHS Markit noted in the statement that the business's confidence now hit a 50-month high.
"These positive results add to hopes that the sector is on a fast upward trajectory, with the obvious caveat that the Covid-19 pandemic could hit back at any time," Harker said.
Indonesia has seen daily new Covid-19 cases hovered between 5,000 to 6,000 cases a day – less than half to its peak in January – for more than three weeks now.
Epidemiologists said the pandemic has been under control in the country. But, they warned that as the second or third waves reappeared in places like India or Europe, the risk of the pandemic returning remains intact.
On the less optimistic side, IHS Markit also said that export orders fell for the six months in a row, though they were still above the year-earlier rate due to pandemic disruptions to the global trade.
Manufacturers also faced inflation in input costs, which rose at the fastest pace since October 2018 due to supply shortages. Also, supplier delivery time has not improved for a fourteenth consecutive month due to a combined factor of supply shortages, shipment delays, and weather disruption, IHS Markit said.