Economist: Cost pressures and weakening demand trigger decline in manufacturing PMI
Jakarta (ANTARA) - Economist from the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, assesses that the decline in Indonesia’s manufacturing Purchasing Managers’ Index (PMI) to 49.1 in April 2026 was triggered by high production costs pressuring industrial activity.
The manufacturing PMI is an indicator of industrial sector activity, where a figure above 50 indicates expansion or growth in industrial activity, while below 50 signals contraction or slowdown.
Contacted in Jakarta on Wednesday, Yusuf explained that from the production side, industrial input costs have risen sharply and are at their highest level in several years.
According to him, this increase was triggered by disruptions in the global supply chain since the escalation of conflicts in the Middle East, including the conflict between Iran and the United States-Israel.
“The impact is felt in rising raw material prices, disrupted supplies, and increasingly delayed deliveries,” he said.
On the other hand, domestic demand is also seen to be weakening, exacerbating the pressure on the manufacturing sector.
In his view, this situation has left industry players in a tight spot because cost increases cannot be fully passed on to selling prices due to weak demand.
As a result, many companies have chosen to hold back production or even reduce output in recent months, which is then reflected in the decline in the manufacturing PMI.
Yusuf said that if this condition persists, the pressure on the manufacturing sector could spread to lower factory utilisation, weakening business confidence, and stalled investment.
According to him, the government needs to respond promptly through more targeted policies, particularly by providing incentives to the most affected sectors and keeping production costs competitive.
In addition, strengthening the domestic supply chain and diversifying sources of raw materials are also considered important to reduce reliance on imports.
“If this pressure is not addressed quickly and the PMI contraction continues, the impact could be quite broad, including on employment absorption and economic growth,” Yusuf stated.
In response to the situation, the Ministry of Industry stated that it is taking mitigation measures and strengthening the national industrial sector, including accelerating the formulation of various strategic policies, such as strengthening import substitution, increasing the use of domestic products (P3DN), and diversifying sources of raw materials and export markets.
In addition to existing industrial protection policies, the Ministry of Industry is also preparing new proposals in the form of incentives and additional protection policies for industry.