THE Indonesian manufacturing sector is still sluggish.
S&P Global released Indonesia’s manufacturing Purchasing Managers’ Index (PMI) for June at 46.9, down from 47.4 in May. For 3 consecutive months since April, the manufacturing PMI score has been in the contraction zone below 50.
The manufacturing sector contraction accelerated in mid-2025, signaling a negative outlook for the months ahead. Demand weakened and sales fell at the fastest pace since August 2021, leading to a decline in production that led to layoffs and purchases of raw materials.
Business confidence fell to its lowest level in 8 months.
The slowing down in June 2015 to 46.9 from 47.4 in May 2025 among other things are caused by 2 main factors.
- First, the industry is still waiting for pro-business policies.
- Second, weakening demand from the export and domestic markets and decreasing purchasing power in Indonesia.
PMI contraction over the past three months was influenced by the variables of decreasing output and purchasing of raw materials, as well as the variable of labor which also decreased. We can see the need to accelerate purchasing power stimulus, production incentives, and improve the logistics and energy ecosystem, so that industry can maintain production continuity.
BPS that matters
The Indonesian Central Statistics Agency (BPS) reported that the consumer price index (CPI) in June 2025 experienced inflation of 0.19% on a monthly basis, from 108.07 in May to 108.27 in June. Annually, there was inflation of 1.87% compared to June 2024, and on a calendar year basis inflation was recorded at 1.38%.
The expenditure group contributing to inflation was food, beverages and tobacco, which was 0.46% with an inflation contribution of 0.13%.
The dominant commodities driving inflation were rice with an inflation contribution of 0.04%, airfare with a contribution of 0.04%, cayenne pepper 0.03%, shallots, tomatoes, and gold jewelry each with 0.02%.
Meanwhile, commodities that still contributed to deflation were red chilies and garlic with a deflation contribution of 0.03%. Then, gasoline with a deflation contribution of 0.02%.
Indonesia’s trade balance in May 2025 recorded a surplus of USD 4.30 billion or 61 consecutive months. Exports in May 2025 were recorded at USD 24.61 billion and imports at USD 20.31 billion.
The surplus was supported by non-oil and gas commodities of USD 5.83 billion including animal and vegetable fats and oils, mineral fuels and iron and steel. Meanwhile, oil and gas commodities had a deficit of USD 1.53 billion, including oil and crude oil as the largest contributors.
Indonesia recorded the largest trade deficit with China, which was USD 8.15 billion throughout 2025. Apart from China, the largest deficits occurred with Singapore and Australia, respectively USD 2.79 billion and USD 2.11 billion.
On the other hand, throughout January-May, Indonesia recorded a trade surplus with the United States of USD 7.08 billion, India USD 5.30 billion, and the Philippines USD 3.69 billion.
