Manufaktur Lesu, Pekerja "Madesu"

Summary

The Indonesian manufacturing sector is facing a significant downturn, with the Purchasing Managers Index (PMI) dipping below 50 for two consecutive months, signaling contraction. This weak performance is attributed to reduced domestic and international demand, leading to layoffs, reduced working hours, and recruitment delays. The impact is widespread, especially in Central Java, Jakarta, and Riau. The sector, contributing 19% to the GDP, is crucial to the nation's economy, but its struggles threaten growth and employment. With the government under pressure, urgent fiscal and structural support is needed to stabilize the sector and prevent further layoffs.

Takeaways

• 😀 Indonesia's manufacturing sector is currently facing a contraction, signaling a potential slowdown in economic growth and rising unemployment rates.
• 😀 The Manufacturing PMI for June 2025 dropped to 46.9, indicating a continued weakening of industrial activity for the second consecutive month.
• 😀 This decline in the manufacturing sector has been driven by decreased domestic and international demand, causing a reduction in orders and limited production.
• 😀 As a result, many companies are adjusting their workforce policies, including limiting employee working hours and delaying recruitment, leading to increased stress for workers.
• 😀 The weakening rupiah exchange rate and high credit interest rates are further burdening industrial operations, forcing companies to focus on efficiency to maintain healthy cash flow.
• 😀 Bank Indonesia's monetary stability efforts are seen as insufficient, with industry players calling for more structural support, particularly in fiscal matters, tax incentives, and export facilitation.
• 😀 Layoffs in the manufacturing sector are already a growing concern, with over 30,000 workers affected by June 2025, according to Ministry of Manpower reports.
• 😀 Central Java Province has seen the highest number of layoffs, with over 10,000 workers impacted, followed by Jakarta and Riau.
• 😀 Discrepancies in layoff data from different sources, such as the Ministry of Manpower and labor unions, highlight concerns over transparency and data accuracy.
• 😀 The manufacturing sector, contributing around 19% to Indonesia's GDP, is critical to economic growth, and its contraction has a domino effect on other sectors of the economy.
• 😀 Despite these challenges, some sub-sectors like food and beverage, base metals, and leather and footwear are showing positive growth, driven by increased consumption and export demand.

Q & A

What does the decline in the Indonesian Manufacturing PMI indicate?

The decline in the Indonesian Manufacturing PMI indicates that the manufacturing sector is experiencing contraction. A PMI below 50 signifies a decrease in industrial activity, which in this case has been ongoing for two consecutive months, signaling weakening demand both domestically and internationally.

How does the weakening of the Indonesian rupiah affect the manufacturing sector?

The weakening of the Indonesian rupiah adds pressure on industrial operations by increasing the cost of imported goods and raw materials. This impacts the profitability of manufacturers, making their operations more costly and less competitive in the global market.

What is the primary concern related to rising unemployment in the manufacturing sector?

The primary concern is that rising layoffs in the manufacturing sector could lead to higher overall unemployment in Indonesia. Given that manufacturing contributes 19% of the national GDP, a surge in unemployment could negatively impact the broader economy and slow down the recovery process.

What was the key factor contributing to the lowest PMI reading since April 2025?

The key factor contributing to the lowest PMI reading was a decline in demand, both domestic and international. Many factories also reported a decrease in the number of orders and were forced to limit production, which resulted in further contraction of the sector.

How have companies responded to the economic downturn in the manufacturing sector?

In response to the downturn, companies have implemented cost-cutting measures such as limiting employee working hours, delaying recruitment processes, and adjusting roles to retain existing employees, all while trying to maintain financial stability.

What role do export demand and global market conditions play in the manufacturing sector?

Export demand plays a significant role in the manufacturing sector’s recovery, especially for industries like base metals, where increasing export demand for commodities like iron and steel has supported growth. However, global market conditions remain challenging, and manufacturers must navigate these to remain competitive.

Why is there concern over the accuracy of layoff data in Indonesia?

There is concern over the accuracy of layoff data due to discrepancies between reports from the Ministry of Manpower, the Indonesian Employers Association (APINDO), and labor unions. This raises questions about the transparency and consistency of the data collection process, which affects policy responses.

How has the government responded to the challenges facing the manufacturing sector?

The government has attempted to maintain monetary stability through Bank Indonesia, but there is increasing pressure for more targeted support. Industry players are calling for structural support in the form of fiscal incentives, tax breaks, and export facilitation to help the manufacturing sector recover.

Which sectors within the manufacturing industry have seen growth despite the overall downturn?

Despite the downturn, the food and beverage industry (6.04% growth) and base metals (14.47% growth) have experienced positive growth. This growth is largely driven by higher consumption during Ramadan and Eid al-Fitr, and increased export demand for metals like iron and steel.

What are the main factors contributing to the surge in layoffs in the manufacturing sector?

The main factors contributing to layoffs in the manufacturing sector include business losses, industrial relocations, efficiency measures, and cost-cutting strategies, such as reducing the workforce to maintain profitability in the face of declining demand.