Indonesia Manufacturing PMI Hits 52.6 as Domestic Demand Lifts Regional Standing

JAKARTA, Investortrust.id — Indonesia’s manufacturing sector strengthens at the start of 2026 as the S&P Global Indonesia Manufacturing PMI climbs to 52.6 in January, reinforcing optimism that domestic industry competitiveness continues to improve amid uneven global conditions. The index rose from 51.2 in December, keeping Indonesia firmly in expansion territory for a sixth consecutive month and placing it among the stronger performers in Asia.

The January PMI reading positions Indonesia fourth globally in a comparative survey of major economies, behind India at 55.4, the Philippines at 52.9, and Thailand at 52.7. Indonesia outperformed Vietnam at 52.5, the United States at 52.4, and Australia at 52.3, while several European economies remained in contraction.

.

The improvement was driven primarily by stronger domestic demand and faster output growth, according to the survey compiled by S&P Global Market Intelligence. New orders expanded for the sixth straight month, while production rose at its second-fastest pace in nearly a year.

“This development is an optimistic signal that underscores Indonesia’s resilience and external competitiveness amid both domestic and global challenges,” said Febrio Kacaribu, Director General of Economic and Fiscal Strategy at the Ministry of Finance. He added that the PMI performance reflects solid underlying fundamentals in the national manufacturing base.

Business sentiment also improved markedly, with optimism about production over the next 12 months reaching its highest level in ten months. Firms reported rising backlogs of work, suggesting sustained near-term activity even as employment edged down slightly for the first time since July 2025.

“Indonesia’s manufacturing economy improved at a moderate pace during January, driven by stronger improvements in output and new order inflows,” said Usamah Bhatti, economist at S&P Global Market Intelligence. “Once again, the expansion looks to have been led by the domestic economy, given a sustained contraction in new export sales.”

Regional data highlight Indonesia’s relatively strong positioning within Southeast Asia, where aggregate manufacturing PMI stood at 52.8 in January. The Philippines and Vietnam continued to post solid expansions, while Malaysia hovered just above the 50 threshold, signaling only marginal growth.

Globally, divergence remains pronounced. India led major economies with a PMI well above 55, reflecting robust demand, while the euro area remained in contraction at 49.5. Germany, Italy, and Spain all posted sub-50 readings, underscoring ongoing weakness in European manufacturing.

Indonesia’s PMI momentum aligns with broader domestic indicators pointing to firm economic activity at the end of 2025. Retail sales grew 4.4% year on year, vehicle sales surged in double digits, and electricity consumption expanded, particularly in the business segment.

External trade data also support the manufacturing narrative. Indonesia recorded a trade surplus of $2.51 billion in December 2025, with non-oil and gas exports rising 13.72% year on year, led by a 19.26% increase in manufactured goods exports.

Inflation pressures edged higher in January but were largely driven by administrative price factors and a low base effect, with officials characterizing the increase as temporary. Core inflation remained contained, supporting expectations of continued domestic demand resilience.

Looking ahead, the government said it would continue to strengthen the business environment through investment facilitation and the acceleration of bottleneck resolution. Officials argue that these measures are critical to sustaining manufacturing expansion and improving Indonesia’s position within regional and global supply chains.