FX.co ★ Indonesia Manufacturing Contracts at Slower Rate

The S&P Global Indonesia Manufacturing PMI increased to 47.4 in May 2025, up from April's nearly four-year low of 46.7, suggesting a less severe contraction in manufacturing activity. Nonetheless, this marks the second consecutive month of decline, with production continuing to decrease, albeit at a reduced rate. New orders experienced their steepest decline since August 2021, and exports, particularly to the United States, saw further reductions. Procurement activity dropped for the second month, prompting firms to cut both pre- and post-production inventories. Despite the drop in demand, delivery times were extended to a nine-month high due to adverse weather conditions and delays. Employment rose for the fifth time in six months as companies geared up for a potential recovery by utilizing additional capacity to alleviate backlogs, although the rate of increase slowed. Input cost inflation intensified for the first time in three months, driven by widespread raw material price hikes. Nevertheless, firms absorbed more costs and offered discounts, resulting in only minor rises in output prices. Finally, sentiment improved with optimism about a potential recovery.