Alfitria Nefi P, Jakarta – The Indonesian Ministry of Industry reports that many factories are ceasing production due to the contraction of the manufacturing variable of the Industrial Confidence Index. "This does not mean that all factories have stopped production, it's merely on hold," said ministry spokesperson Febri Hendri Antoni Arief in a press conference in South Jakarta on Thursday, August 28, 2025.
The index, Febri said, climbed to 53.55 in August, indicating expansion. Meanwhile, the manufacturing sector is suffering contraction, down 4.15 points to 44.84 in August 2025.
According to Febri, these factories are ceasing production to "wait and see" about domestic and global economic conditions.
"Just awaiting the development on exports, the global economy, tariff agreements, and geopolitical turmoil overseas," he said, adding that companies are using available inventories to meet current domestic and export demands.
Febri believed that the sluggish manufacturing variables were caused by the stagnated imports of raw materials and consumer goods over the past two months, particularly in June 2025. "No growth in raw material imports aligns with the previously mentioned contraction in the manufacturing variable," said Febri.
Based on data from Statistics Indonesia, the month-to-month imports of consumer goods, raw materials/auxiliaries, and capital goods dropped in June 2025. Consumer goods imports dropped by 1.5 percent, raw material/auxiliaries by 4.9 percent, and capital goods imports by 5.8 percent.
Meanwhile, the Secretary of the Directorate General of Agro Industry at the Ministry of Industry, Yulia Astuti, suspected several causes for the contraction in manufacturing variables. First, the hindered access to raw materials and auxiliaries, which is generally caused by fluctuating import prices. Second, Yulia suspected high inventory levels due to hindered distribution of finished goods.
"We see this as a consequence of U.S. tariff policies," said Yulia. She also highlighted global logistics issues and the slowing consumption both domestically and internationally.