Stagnation Overshadows Manufacturing Performance

Jumat, 21 Juni 2013 | 11:30

Despite the average operating conditions in companies tend to improve, stagnation symptoms begin to overshadow the production in manufacturing sector throughout May 2013 compared to the sector’s performance in April.This condition was reflected in the figures of purchasing managers index (PMI) released by HSBC. The index reached only 51.6 last month, while in April it reached 51.7. According to HSBC analysis, expansion in domestic production sector was a bit stagnant.

PMI is a periodic index adjusted from separate diffusion index measuring changes in output, new orders, employment, supplier delivery schedules, and stock purchases. In this index, the figure above 50.0 indicates growth or expansion, while below 50.0 reflects contraction.

According to the analysis, May 2013 was the third month for the growth in domestic manufacturing output, which rose consecutively since March. There were also data showing the placement of new employment.

However, the production growth was still moderate after loosening in April 2013. In fact, around 27% of companies surveyed indicated that the increase in consumption wasn’t able to boost demand volume toward higher product, while 21% admitted that they had suffered a decline in demand.

 “The improvement of domestic industry operating performance is mainly supported by external demand, i.e. exports,” said Su Sian Lim, HSBC economist for ASEAN region, Sunday (6/9).

Demand for exports to the goods-producing industries in the country continued to increase last month. The export demand derived from countries like China, Japan, and Vietnam. Despite moderate performance growth, the overall rate of growth in April-May 2013 was actually the highest since November 2012.

The inventory of industrial jobs declined last year, ending the accumulation over the past 5 months. Around 12% of the companies surveyed indicated a decline in inventory, while the other 10% showed an increase.

Meanwhile, post-production inventory decreased during May 2013. It’s used to meet increasing in new demand.

There’s increased of average purchase price in manufacture. Overall, the inflation is still affected despite fell to the lowest point in the last five months. Several companies mentioned other triggers were unfavorable exchanges rates. As a result, the producers must increase products selling price.

“Increasing in input or output price was sluggish, but the industry needs to be aware of the ongoing supply delivery schedule. They should always be ready with inflation, as structural factors continue to impede goods distribution to market,” said Lim.

Import Increase

Another cause of sluggish growth was input purchase hike or import during last month. This is the fourth months import increased. Therefore, a number of companies with raw materials and intermediate goods are more accumulated.

Vice Chairman of the Monetary Policy, Fiscal, and Public Indonesian Chamber of Commerce Hariyadi B. Sukamdani said the operations of various industry sectors are more actively encouraged in Q2/2013. He projected industrial operations would peak at Q3/2013.

Based on Statistic Indonesia (BPS), raw materials import in January-April 2013 period rose 4.44% compared to same period last year. The total of non oil and gas import in April 2013 reached US$12.71 billion or increased US$1.73 billion or 15.75% from US$10.98 billion in March 2013.

Machinery and mechanical equipment import in April 2013 reached US$2.4 billion, grew by 14.48% from US$2.08 billion in March 2013. Iron and steels import also rose 23.27% to US$1.04 billion from US$845.3 million in March 2013.

The imports hike need to be wary as previously, the Ministry of Industry had corrected manufacture industry growth target this year to 6.5% from 7.14%.

In Q2/2013, the Industry Ministry predicted stagnant growth at 6.69%. However, the Ministry is optimistic performance growth in Q3/2013 and Q4/2013 able to drive growth this year at 7.14%. (T06/T08/aph)

by Febriany D.A. Putri, Elok Ani Riani, Arsyad Paripurna