Manufacturing Sector in June 2024 Still Shows Positive Performance but Signs of Slowdown Appear

Jakarta, INTI - The manufacturing sector in June 2024 continued to show positive performance, as indicated by the expansion of the Purchasing Manager’s Index (PMI) for manufacturing at 50.7, which has been sustained for 34 consecutive months.

“Up until June 2024, thankfully, the manufacturing sector still shows positive performance. We extend our gratitude for the hard work of industry players who continue to maintain productivity and business expectations for the next 12 months, especially under the current business conditions affected by slowing demand,” said the Ministry of Industry spokesperson, Febri Hendri Antoni Arif, in Jakarta, Monday (1/7).

Signs of Growth Slowdown

Febri highlighted a report by S&P Global, stating that the growth of the manufacturing sector lost momentum in June 2024. This was due to slower increases in output, new orders, and sales. This condition also affected confidence in output for the next 12 months, which remained at the lowest position similar to May and among the lowest on record.

“The industrial sector is currently in an alarming condition. Industry players are less optimistic about future business developments. This is influenced by weakening new order growth due to market conditions, trade restrictions in other countries, and unsupportive regulations,” explained Febri.

Impact of Import Regulations

According to Febri, the regulation in question is the Ministry of Trade Regulation Number 8 of 2024 on Import Policies and Arrangements. This regulation relaxes the import of goods from abroad similar to those produced domestically. This has caused a decline in the optimism of industry players, impacting the PMI decline.

“Unlike some peer countries experiencing an increase in manufacturing PMI, in Indonesia, it has dropped significantly. Policy adjustments are needed to boost the optimism of industry players,” emphasized the Ministry of Industry spokesperson.

Need for Policy Adjustments

The necessary policy adjustments include reverting import arrangements to the Ministry of Trade Regulation No. 36 of 2023 and implementing Safeguard Duties (BMTP) and Anti-Dumping Duties (BMAD) on certain commodities.

Global manufacturing countries like China, India, Taiwan, South Korea, Thailand, and Vietnam are experiencing expansion increases. In the ASEAN region, Thailand's manufacturing PMI rose from 50.3 in May 2024 to 51.7 in June 2024, while Vietnam's surged from 50.3 in May 2024 to 54.7 in June 2024.

Layoffs and Flood of Imported Products

The emergency condition faced by the manufacturing industry can be seen from the phenomenon of layoffs (PHK) caused by the decline in global market demand and the flood of imported products being 'dumped' into the domestic market due to trade restrictions by other countries. According to Febri, if Indonesia does not implement regulations related to this, imported products will increasingly flood the market and push back domestic products.

Industry players also express the need for adjustments to current regulations. The Head of Human Resources at the Indonesian Textile Association (API), Harrison Silaen, stated that the government needs to have a clear direction in addressing issues in the textile industry if it considers the industry important. Currently, local entrepreneurs find it difficult to compete with the massively entering textile products.

Warning from S&P Global

Economics Director at S&P Global Market Intelligence, Trevor Balchin, stated that PMI remains above the long-term average trend, but the Future Output Index forecast has not moved from May's position and is among the lowest on record. This indicates a lack of recruitment in June and the first decline in work backlog accumulation in seven months. The trend shows a sharp decline in new orders at the start of the second half of this year, marking the second contraction since mid-2021.

“We must anticipate this early warning from S&P economists to ensure Indonesia does not lose momentum in increasing manufacturing sector growth like other industrial countries worldwide,” concluded Febri.

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