S&P GLOBAL reported that Indonesia’s Purchasing Managers’ Index (PMI) in May was at 47.4, up slightly from April’s 46.7. A PMI below 50 indicates manufacturing activity is contracting, not expanding.
S&P Global said the manufacturing sector contracted in May due to new orders falling to their lowest level in almost 4 years. Production fell, as did exports. However, businesses are confident that the downturn will pass. Confidence in production in the next 12 months is also strengthening.
The Indonesian Central Statistics Agency (BPS) reported that the consumer price index (CPI) in May 2025 experienced deflation of 0.37%. There was a decrease in the CPI from 108.47 in April 2025 to 108.07 in May 2025.
Annually inflation (yoy) was recorded at 1.6%, and year-to-date inflation was 1.19%. The expenditure groups that contributed the most to deflation include food, beverages, and tobacco with deflation of 1.4% which contributed to deflation of 0.41%. The dominant commodities driving deflation were the red chili and cayenne pepper groups, each contributing to deflation of 0.12%.
BPS also announced that the trade balance in April 2025 had a surplus of USD 160 million. This is a surplus for 60 consecutive months since May 2020. Exports in April were USD 20.74 billion, up 5.76% annually (yoy).
The trade surplus value in April was far below market estimates which predicted there would still be a surplus of USD 2.8 billion. The surplus value is the lowest in the last 5 years.
The deflation in May was a sign of sluggish purchasing power. For example, in the household appliances component, there was a deflation of -0.04% (mtm). Food and beverages, tobacco fell to -1.4% (mtm).
This is a yellow light, there are signs of slowing economic growth in the second quarter of 2025. If low demand continues, mass layoffs will be even more massive in the second semester of this year.
Following the Consumer Price Index data report which recorded a figure lower than market estimates, and a trade balance surplus far below market estimates, the JCI and the price of Indonesian bonds were immediately under pressure.
The yields on the majority of Government Bond tenors moved up, especially the 5-year tenor which rose 4.1 basis points (bps) now at 6.482%. The 10-year tenor rose 2.7 bps, along with the 2Y tenor which rose 2.5 bps. The JCI fell 1.7% to 7,054 at the end of the first trading session. Moreover, the Rupiah weakened to IDR 16,305 per USD.
Meanwhile, Bank Indonesia (BI) reported that retail sales performance in April 2025 experienced a decline, both monthly and annually. This indicates a slowdown in public consumption after Ramadan and Eid al-Fitr. Retail sales in April contracted 5.1% monthly (mtm), and 0.3% annually (yoy).
This figure is the opposite of March which grew 5.5% (mtm) and 13.6% (yoy). The decline in retail sales performance in April can be seen from the Real Sales Index (IPR) which fell to 235.5, compared to March 2025 of 248.3, and April 2024 of 236.3.
