PMI Driven By Domestic Demand, Overseas Orders Deteriorate Again

The Indonesian S&P Global manufacturing PMI for January improved to 51.3 from 50.9, its second consecutive monthly rise and 17^th month above 50. It continues to remain just in expansionary territory driven by better output and domestic sales. Foreign orders deteriorated for the 8^th straight month reflecting slowing global growth, which is likely to remain an issue through 2023.

• Price pressures remained elevated but eased with input costs rising at their slowest rate for two years and pass through to output inflation at a 20-month low. Respondents also noted a softer USD and discount requests had reduced their pricing power. This is good news for Bank Indonesia which has hiked rates 225bp so far this cycle and pivoted to 25bp at its January meeting.
• S&P Global commented that firms were reporting a “high level of client requests” and thus a “positive sales pipelines”.
• While firms felt confident enough to build inventories, they kept staffing levels the same despite capacity constraints, demonstrating a cautious approach. Sentiment remains below its average.
• See report here.

Source: MNI- Market News/Bloomberg/S&P Global