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Indonesia's industrial confidence index drops in December

Jakarta Globe - December 28, 2023

Jayanty Nada Shofa, Jakarta – Indonesia's industrial confidence index has slightly dropped in December 2023, although most businesses remain positive that they will grow in the coming months.

Every month, the Industry Ministry releases this confidence index to gauge the manufacturing industry's optimism towards the economy. The index takes into account three variables, namely: new orders, production, and inventories. The scores are on a 0-100 scale with anything beyond 50 means the industry is expanding and shows great optimism. A 50 indicates a stable industry, while anything below 50 indicates contraction.

The Industry Ministry revealed Thursday that the overall industrial confidence index stood at 51.32 in December, dropping 1.11 points versus 52.43 the previous month. Even so, it is still higher than what Indonesia registered in December 2022.

"Our industrial confidence index grew 0.42 points compared to Dec. 2022 scores of 50.90," the ministry's spokesman Febri Hendri Antoni Arif told a hybrid conference on Thursday.

About 15 out of the 23 manufacturing sub-sectors, particularly the food and beverage industry, are expanding. They contribute 86.3 percent to Indonesia's gross domestic product (GDP). The remaining 8 sub-sectors such as electronics and textiles are facing contractions. These pessimistic sub-sectors represent 13.7 percent of Indonesia's GDP, the Industry Ministry data shows.

Many businesses are still receiving new orders, although not as many. The ministry reported that the industry's overall new order index stood at 53.44, down from 54.85 in November.

"It is on a decline because the industry is getting fewer orders from both home and abroad. Some respondents even attributed [the fewer new orders] to the domestic price competitiveness," Febri added.

The declining orders eventually affected the production index, which reached 53.86 in December. This is a decline from the 54.50 index in November. Aside from fewer orders, some industry players still have enough stock in their inventory. The ministry attributed the smaller production to seasonal factors and raw material availability. The inventory index stood at 42.21 in December.

About 62.4 percent of the business owners are optimistic about the future of their business or at least in the next 6 months. Most of them believe that the market condition, as well as the government policies, will improve. The other 24.7 percent of business owners feel that their business will remain stable.

"Around 12.9 percent of the business owners are pessimistic about their business prospects in the next 6 months," Febri said.

Source: https://jakartaglobe.id/business/indonesias-industrial-confidence-index-drops-in-decembe