Indonesia manufacturing contracts to record low in Dec: PMI

[JAKARTA] Indonesia's manufacturing activity contracted for the third straight month in December, falling to its weakest level since early 2011 due to declining output and export orders, the HSBC Markit purchasing managers'index (PMI) survey showed on Friday.

The HSBC Markit Purchasing Managers' Index (PMI) fell to 47.6 in December, the lowest reading since the survey began in April 2011.

That was down from 48.0 in November. A reading below 50.0 signals a contraction in activity. "The PMI weakened to yet another record low in December, as weak external demand placed a particularly large drag on manufacturing sector conditions," said Su Sian Lim, economist at HSBC.

Output dropped at the quickest rate since January 2012, with many businesses attributing the fall to a lack of new orders. Employment and foreign orders contracted at a sharper rate than in November.

Manufacturers' costs also increased due to November's fuel price hike and a weakening rupiah.

But inflationary pressures are expected to subside over the next couple of months. "There are some signs that, while manufacturing sector conditions are likely to remain soft in the coming months, the PMI may be reaching its nadir," Ms Lim said.

Indonesia's economy grew 5.01 per cent in the third quarter from a year earlier, its slowest in five years, highlighting the challenges that new President Joko Widodo faces trying to turn around Southeast Asia's largest economy.

REUTERS