Sustaining the Manufacturing Pulse Amid Global Uncertainty

Indonesia’s manufacturing industry sector has again shown positive momentum and entered an expansion zone at the start of the third quarter of 2026.

Based on the S&P Global release, Indonesia’s Manufacturing Purchasing Managers’ Index (PMI) for July 2026 stood at 50.2, a significant jump from 46.9 in June 2026.

This achievement marks a recovery in national industrial operations, supported by a return to output growth for the first time since February 2026, stabilisation of new orders, and renewed employment growth after four consecutive months of decline.

Ministry of Industry spokesperson Febri Hendri Antoni Arif stated that the return of the Manufacturing PMI to expansionary territory reflects strengthening business confidence and the resilience of the industrial sector amid raw material cost dynamics and global uncertainty.

“The 3.3-point increase from June confirms that the wheels of manufacturing production are moving quickly again. The rise in output and the growth of new jobs show that consumer confidence and domestic market demand continue to improve,” said Febri.

Indonesia’s Manufacturing PMI indicator for July 2026 stood at 50.2, up from 46.9 in June 2026. The increase was supported by production output, which rose again for the first time since February 2026.

In addition, new demand also helped lift the July 2026 PMI, as it stabilised amid strengthening client confidence and the launch of new projects. Employment absorption also increased again after four consecutive months of adjustment.

The S&P Global survey also showed that business confidence or optimism for the next 12 months soared to its highest level in six months, while the pace of raw material price increases slowed to its lowest point in four months.

Although macro manufacturing indicators show a solid recovery, the Ministry of Industry urged all stakeholders to remain vigilant about global supply chain dynamics and exchange rate fluctuations.

The Ministry of Industry is committed to continuing to oversee the availability of raw materials, energy affordability, and domestic market protection so that this expansive recovery trend can be maintained and improved in the second half of 2026.

Indonesia’s PMI achievement, which has returned to the expansion zone, places the country on par with the majority of countries in the region that are also in a manufacturing growth phase.

In July 2026, Indonesia recorded a PMI of 50.2, higher than Myanmar at 49.3, Malaysia at 50.2, the Philippines at 51.8, and Vietnam at 52.9. In addition, Indonesia’s Manufacturing PMI also surpassed other countries such as China at 50.9 and Australia at 52.0.

The Indonesian Chamber of Commerce and Industry (Kadin) considers it necessary to maintain consistent expansion in the coming months, supported by other indicators such as increased industrial output, production capacity utilisation, and investment to ensure a sustainable recovery.

Kadin Indonesia Deputy Chairman for Industry Saleh Husin said that compared with ASEAN countries, Indonesia’s manufacturing position has improved. However, the pace of expansion is still relatively moderate compared with a number of countries recording higher growth.

Saleh reminded that industry still faces a number of challenges, ranging from rising raw material costs and weak export demand to cautious attitudes among businesses in purchasing raw materials.

Furthermore, he said the PMI reflects short-term business activity conditions, while investment decisions require consideration of demand prospects and certainty of economic sustainability.

“Businesses are expected to continue monitoring the sustainability of the demand trend in the coming months before expanding capacity or making new investments,” said Saleh.

Chairwoman of the Indonesian Employers Association (Apindo) Shinta W Kamdani said that from the real sector perspective, the second quarter of 2026 was a difficult quarter because many industries experienced cost-push inflation due to the impact of the conflict in the Strait of Hormuz (rising energy prices) and the effect of the rupiah’s depreciation on increasing production cost burdens and imported raw materials.

“In the second quarter of 2026, the real sector also experienced export demand pressure from various of Indonesia’s trading partner countries because geopolitical conflict caused a decline in purchasing power in a number of countries that experienced deeper oil and gas price shocks than Indonesia,” she said.

Export demand in the second quarter was also disrupted by trade issues such as the US investigation into Indonesia. Moreover, the domestic market also experienced a slowdown in demand due to fuel price increases.

“So economic activity in the real sector, at least as experienced by businesses, throughout the second quarter of 2026 was quite difficult and thus less supportive of business expansion,” said Shinta.

Trimegah Sekuritas Indonesia Chief Economist Fakhrul Fulvian assessed that the structure of economic growth is still highly dependent on government spending. Meanwhile, the main engine of the private sector, particularly manufacturing and mining, still faces pressure.

He argued that this condition is reflected in the relatively weak performance of the manufacturing sector.

The processing industry, as the largest contributor to national gross domestic product (GDP), grew only 0.88% quarterly, while annually it grew 4.52%, lower than service sectors that experienced higher acceleration. Yet manufacturing contributes around 18.5% to national GDP, so the slowdown in that sector greatly affects the quality of Indonesia’s economic growth.

According to him, the weakness of manufacturing is not a surprise because it had previously been reflected in Indonesia’s Manufacturing PMI data, which had been in a contraction phase for several months.

“GDP data confirms the signal that the PMI had already given earlier. The manufacturing business world still faces demand pressure and uncertainty, so industrial sector expansion has not been able to return as the main driver of the economy,” explained Fakhrul.