Why Indonesia’s Manufacturing PMI Contracted in December

According to a report by Markit Economics, Indonesia’s (IDX) (ASEA) manufacturing PMI (purchasing managers’ index) contracted in December 2017. It stood at 49.3 in December as compared to 50.4 in November 2017. It fell into the contraction zone in December after four consecutive months of expansion.

In December, Indonesia’s manufacturing PMI was driven by the following factors:

• Production output and volume fell heavily in December 2017.
• New orders dropped moderately in December 2017.
• Export orders also declined for the first time since August 2017.
• Employment in the manufacturing sector also remained weaker in that month.

Manufacturing activity dropped mainly due to the fall in client demand. As Indonesia is an important part of the Asian economy (ASEA), the strong improvement in its economic activity is a positive sign for investors. Various firms in the country reduced staffing levels in December. However, firms’ buying activity improved during the month.

The VanEck Vectors Indonesia ETF (IDX), which tracks the performance of the Indonesian economy, rose 6.8% in December 2017. The Global X FTSE Southeast Asia ETF (ASEA) rose 1.3% in the same month. In the next part of this series, we’ll analyze Russia’s manufacturing PMI in December 2017.