Indonesia's Manufacturing PMI Plummets to 46.9, Inflation and Layoffs in Focus

Indonesia’s manufacturing Purchasing Managers’ Index (PMI) fell to 46.9 in June 2026, according to data released by S&P Global, marking the strongest rate of contraction in a year. The decline was driven by a renewed drop in new orders, which caused the largest reduction in output since April 2025. S&P Global noted the headline figure signalled a solid deterioration in the health of the goods-producing sector, representing one of the most significant declines in operating conditions at factories over the past year. The primary cause of the June downturn was a fall in demand for Indonesian manufactured goods, with new orders decreasing for the first time in three months and at the fastest pace in a year. Usamah Bhatti, Economist at S&P Global Market Intelligence, stated that the health of Indonesia’s manufacturing sector deteriorated for the second time in three months, closing the first half of 2026 on a weak note. The negative demand trend prompted firms to cut output for a fourth consecutive month, with the reduction being the sharpest since April 2025. In response to these conditions, companies significantly reduced their workforce numbers and purchasing activity, while inventories also declined amid weakening demand. S&P Global highlighted that goods producers shed jobs at a solid pace in June, marking the fastest rate of layoffs since September 2021. Concurrently, input purchasing fell for the fourth straight month at the quickest rate since August 2021, with some firms noting that rising raw material prices also hampered buying activity. Bhatti added that price pressures remained historically high, as manufacturers recorded an increase in average cost burdens amid reports of rising raw material prices. The rate of inflation was the second-highest on record, driving the steepest increase in factory gate selling prices in nearly 13 years.