Indonesia's Manufacturing Industry is Rebounds

By : M. Amru | Sunday, December 03 2023 - 20:55 IWST

Illustration of Thai Industrial Activity (IST)
Illustration of Thai Industrial Activity (IST) - Preparations for the Christmas Celebration and year-end holidays are encouraging the processing industry to "rebound" in November 2023. This can be seen from the Economic Conditions Index (IKE) and Consumer Expectations Index (IEK) which have increased, especially in the Job Availability Index issued by the Bank Indonesia. The demand for order fulfillment at the end of the year is also thought to encourage an increase in job opportunities.

This condition is also reflected in the increase in the Consumer Confidence Index (IKK) in October 2023 which increased to 124.3 compared to September 2023. In line with this, the sloping inflation of several main partner countries and the strengthening of the Rupiah provided positive sentiment for the non-oil and gas processing industry in the month this November.

Meanwhile, the Industrial Confidence Index (IKI) released by the Ministry of Industry in November 2023 showed a figure of 52.43, an increase of 1.73 points compared to October 2023. The increase in the IKI value in this period was supported by three main things, namely increasing production and demand, strengthening the rupiah exchange rate, as well as seasonal factors for preparation for the end of the year (Christmas and New Year/Nataru).

"The increase in IKI was influenced by the increase in IKI values ​​in 15 subsectors, with 13 of them experiencing a rebound after previously experiencing a slowdown or contraction," said Industry Ministry spokesperson Febri Hendri Antoni Arif when releasing the November 2023 IKI in Jakarta, Thursday (30/11) .

However, according to Febri, the IKI value in November 2023 should be higher if the Certain Natural Gas Price (HGBT) program runs well. Apart from that, import control and law enforcement on illegally imported products also need to be effective. "Therefore, it is necessary to strengthen coordination and synergy across Ministries and Institutions as a follow-up," he added.

Furthermore, in the November IKI, the largest increase was experienced by the ytdl machinery and equipment industry (+9.37) which previously experienced the largest decline (-10.26). The twelve sub-sectors that experienced a rebound are the Tobacco Processing Industry, Apparel Industry, Metal Goods Industry, Non-machinery and Equipment, Leather Industry, Leather Goods and Footwear, Paper and Paper Goods Industry, Printing and Recording Media Reproduction Industry, Processing Industry Others, Pharmaceutical Industry, Chemical and Traditional Medicine, Motor Vehicle Industry, Trailers and Semitrailers, Rubber Industry, Rubber and Plastic Products, and Basic Metal Industry.

Meanwhile, two other sectors that experienced an increase in IKI values ​​in two consecutive months were the Beverage Industry and the Furniture Industry. The increase in IKI for the furniture industry is driven by demand for products in new markets, namely the Middle East and ongoing promotions both at home and abroad.

The increase in the IKI value was also caused by 6 (six) subsectors changing their level to expansion, bringing the number of subsectors experiencing expansion to 17 (seventeen) subsectors with a contribution to Q3 2023 GDP of 91.1%. Of the 17 subsectors, 6 (six) subsectors changed from contraction to expansion with a contribution to GDP in Quarter III - 2023 of 17.94%. Meanwhile, 3 (three) subsectors changed from expansion to contraction with a contribution to GDP in Quarter III - 2023 of 5.04%.

If we look at the variables forming the IKI, there was an increase in the new orders variable (+3.13) and the production variable (+3.67) to 54.85 and 54.50. The product inventory variable is still experiencing contraction and the IKI value has decreased by 4.66 points to 43.29, meaning there has been an increase in product stock in the processing industry.

"Even though the product inventory variable has increased in contraction, this condition does not indicate bad business conditions because new orders and production have increased," Febri added.

A spokesperson for the Ministry of Industry explained that the general conditions of business activities in November 2023 were better than in October 2023. This can be seen from the increase in respondents who answered that their business conditions were improving and stable, increasing from 75.6% to 78.8%. Apart from that, the level of optimism among business actors for the next six months also increased from 61.02% to 61.41%.

This condition also shows that the industry is preparing products to complete orders in anticipation of an increase in orders accompanied by a decrease in productivity due to the Christmas holiday. In the November IKI, there were still 6 (six) subsectors experiencing IKI contraction values ​​with 2 (two) subsectors of which their contraction levels were getting deeper. The lowest contraction was experienced by the textile industry and the computer, electronic goods and optics industries.

If we look at the subsector, the IKI value of the food industry is recorded as still expanding even though the value has decreased. Apart from that, we need to be aware of the issue of food security as a result of El Nino and climate change. In the textile industry, the deepening contraction is the result of uncontrolled illegal imports in the textile sector. Meanwhile, for the computer, electronic goods and optics industries, it is known that there is a problem with the large amount of stock, so companies are reducing production. Likewise, in the electrical equipment industry, contraction occurred due to government spending having finished, however, orders were still increasing. The implementation of the Commodity Balance and Import Trading Procedure is expected to encourage sectors experiencing contraction to improve.

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