Indonesia Manufacturing Returns to Growth in August as PMI Climbs to 51.5
Main Takeaways
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JAKARTA, Investortrust.id — Indonesia’s manufacturing sector returns to expansion in August as business conditions improve, with the headline Purchasing Managers’ Index rising to 51.5 on Monday, Sept. 1, 2025, supported by stronger output and new orders that prompt firms to increase hiring, purchasing and selling prices in response to firmer demand and higher imported input costs.
S&P Global Indonesia Manufacturing Purchasing Managers’ Index (PMI®) showed the seasonally adjusted reading at 51.5 in August, up from 49.2 in July, marking the first improvement in five months and indicating a modest expansion in operating conditions. The release covered survey responses collected between Aug. 12 and Aug. 21 and followed an embargo that lifted at 07:30 Western Indonesia Time.
Usamah Bhatti, Economist at S&P Global Market Intelligence, said Indonesia’s manufacturing sector marked the midpoint of the third quarter with “a renewed improvement in operating conditions that was the first in five months,” adding that fresh growth in output and new orders was “boosted by the strongest rise in exports in just under two years.”
He noted that firms raised staffing and purchasing to keep pace with demand and that “charges rose at the most marked rate since July 2024” as companies passed higher operating expenses to clients.
Demand and Production
Manufacturers reported renewed growth in both output and new orders for the first time in five months, with several firms citing new product launches and client wins as key drivers. Demand strengthened domestically and abroad, and new export orders rose at the fastest pace since September 2023. Despite the acceleration in demand, companies managed workloads effectively, reflected in a sustained and modest decline in backlogs of work for a fifth consecutive month.
To meet additional production requirements, firms raised employment slightly in August, the first increase in three months. Purchasing activity also increased, and stocks of inputs rose as the modest expansion in buying filtered through to inventories. In contrast, inventories of finished goods fell as manufacturers drew down stocks to fulfill orders on time.
Costs and Prices
Input cost inflation remained solid but eased to one of the softest rates in nearly five years, staying below the survey’s long-run average. A stronger US dollar reportedly pushed up the prices of imported raw materials. In response, manufacturers lifted output charges at the fastest rate since July 2024, signaling a firmer pass-through of costs as firms sought to protect margins.
Suppliers’ delivery times were broadly unchanged compared with July. Some respondents reported quicker deliveries thanks to ample materials availability, while others pointed to shipping delays that offset these improvements. The net result left overall lead times stable on the month.
Business sentiment strengthened from July and remained robust, even if it stayed below the long-run series average. Firms expressed confidence that output would increase over the coming year, underpinned by expectations of better economic conditions, continued product launches and an improvement in customer purchasing power.
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