Indonesian Manufacturing Performance Returns to Expansion Zone
Global rating agency Standard & Poor’s Global Ratings (S&P) reported that Indonesia’s manufacturing Purchasing Managers’ Index (PMI) rose month-on-month to 50.0 in May 2026, returning to the expansion zone. The manufacturing PMI was recorded at 49.1 in April.
During this fifth month, panellists noted that companies experienced an increase in orders, but simultaneously faced shortages of production raw materials. “Indonesia’s manufacturing economy remained under pressure during May, as production was hampered by rising raw material prices and limited input availability,” said Usamah Bhatting, an economist at S&P Global Market Intelligence, in a written report on Tuesday, 2 June 2026.
New order receipts recorded an increase for the second consecutive month, with the highest growth rate since February. Demand performance was primarily driven by improvements in domestic demand. Meanwhile, export performance declined more sharply. International sales have decreased for three consecutive months, with the sharpest contraction rate since August 2021. Panellists concluded that the war in the Middle East and rising prices are weighing on global demand.
Although demand persists, manufacturing industry performance is being pressured by rising raw material prices, which are burdening corporate production. Consequently, the workforce has decreased following the decline in production. Employment has continued to fall for three consecutive months, although the decline was considered marginal.
Panellists noted that production has declined for three consecutive months, albeit at a slower pace than in April. In terms of pricing, input cost inflation was significant and rose again to its highest level during the survey, following the position seen in September 2013.
Panellists noted that the rise in raw material prices led to further cost increases. In May, companies attempted to pass these cost burdens on to clients. Production prices rose at the fastest rate since October 2013.
Price increases and supply shortages hampered purchasing activities in Indonesia’s manufacturing sector during May. Companies also reported having to utilise existing pre-production inventories amidst difficulties in obtaining raw materials. Meanwhile, limited production has also forced companies to use existing stock to fulfil orders.
Regarding supply, average order fulfilment times have been extended for eight consecutive months due to delivery delays and scarcity related to the war, which is weighing on supplier performance. Furthermore, the level of unfinished business increased for the first time since February, driven by raw material constraints affecting the ability of companies to complete orders.
However, companies remain confident that production growth will recover within the next year, with optimism strengthening compared to April. Nevertheless, the level of confidence remains unchanged.