Sun, 03 May 2009
The manufacturing industry contracted in the first quarter of 2009 as firms cut output amid slower economic growth.

Output of the manufacturing industry - which absorbs the second most jobs after agriculture - declined in the first three-month period of 2009 by 1.61 percent from the fourth quarter of last year, the Central Statistics Agency (BPS) reported on Friday.

Contributing around a fifth of the country's gross domestic products (GDP) annually, the industry suffered a 3.26 percent contraction in the fourth quarter of 2008 from the previous quarter.

A lower output means companies operate at a less-then-maximum production capacity, cutting work hours, which could well lead to layoffs.

"The contraction is largely because of the global financial crisis, which started at the end of the third quarter of last year. The good thing is that the contraction in this quarter was smaller than in the previous one," Rusman Heriawan, BPS chairman, told a media briefing.

The slower contraction should confirm earlier statements by the Finance Ministry, which forecast that production activities in processing industries started to pick up since the start of the year, as evident in the approximate 3 percent rise in electricity consumption by industries in the first quarter, after contracting by 3 percent in the last quarter of 2008.

Industry Minister Fahmi Idris said on Thursday that there was a pick up in industrial activities in the first quarter, as compared to the previous quarter, although he added that it had not yet fully recovered from the impacts of the global economic meltdown. One of the indicators is a rise in power consumption among industries.

"An increase in electricity consumption indeed reflects increasing activities by big-scale manufacturers that are responding to *discounts given by state power firm PT PLN* at maximum loads," Fahmi said.

"They are increasing their outputs because power rates decline *at maximum loads*," he added.

The BPS report shows the vehicle industry contracted the most in the January-March period, with output shrinking by 16.5 percent from the previous quarter, confirming bleak sales reports by associations of cars and motorcycles.

Associations of cars and motorcycles earlier reported a sharp decline in sales in the first quarter. Sales of cars sold in the first quarter plunged by 26 percent, while motorcycles dropped by 14.6 percent.

Between January and March, 100,260 new cars, vans and trucks were sold, down from 135,603 units recorded in the same period in 2008, according to the Association of Indonesian Automotive Industries (Gaikindo).

Motorcycle sales meanwhile, which are often used to gauge the purchasing power of lower and middle-income consumers, also slowed to 1.21 million units, down from 1.42 million in the same quarter 2008, said the Indonesian Motorcycle Industry Association (AISI).

Other industries suffering from a contraction include textiles (4.8 percent) as well as woods and nonfurniture wood-based products (5.1 percent).

Some industries, however, have prospered during the hard times, with metal-based goods and the tobacco industry recording the highest and second highest growth rates, at 7.9 percent and 6.8 percent, respectively.

Asked about the prospects of the industry in general for the rest of the year, Rusman was less optimistic, citing a drop in imports of raw materials - with which many manufacturing firms in the country rely on for production.

During the January-March period, imports of industrial raw materials dropped 42.25 percent.

The central bank has estimated a 2 percent full-year growth in manufacturing sector, lower than 3.7 percent realized last year. (mrs)



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