Prompt Manufacturing Index (PMI) – Bank Indonesia

Manufacturing

Performance

Manufacturing industry performance in the fourth quarter of 2020 represented continuous

improvement despite being in a contractionary phase, as reflected by the increase in the Prompt

Manufacturing Index of Bank Indonesia (PMI-BI) to 47.29%, from 44.91% in the previous quarter

and 28.55% in the second quarter of 20201. Improvement were reported in almost all PMI-BI

components, primarily production volume as supported by speed of supplier delivery time and

workers. By sector, most sub-sectors recorded performance improvement in the fourth quarter

of 2020, mainly for Iron and Basic Steel, Fertilizer, Chemical, and Rubber Products, followed by

Paper and Printing sub-sector, which are currently in an expansion phase.

Business Optimism

In the first quarter of 2021, survey respondents predicted an increasing in Manufacturing

Industry and will be in an expansionary phase, with PMI-BI regaining 51.14%, from 47.29% in

the previous quarter. PMI-BI increase will be driven by components of order volume, inventories

and production volume which are in the expansion phase. Within the period, several sub-sectors

are estimated to be in the expansion phase, dominated by Food, Beverage, and Tobacco,

Cement and Non-Metallic Mineral, Fertilizer, Chemical, and Rubber Products, and Paper and

Printed Products.

Prompt Manufacturing Index – Bank Indonesia

The latest Prompt Manufacturing Index-Bank Indonesia (PMI-BI) indicated a shallower

manufacturing industry contraction in the fourth quarter of 2020, with the index improving to 47.29%

from 44.91% in the previous period. Furthermore, respondents predicted further gains in the first

quarter of 2021, moving into expansionary territory with a reading of 51.14% compared with 47.29% in

the fourth quarter of 2020 (Graph 1).

1 An index above 50 points signals business expansion and below 50 points signals business contraction.

The latest PMI-BI

reading indicated a

shallower

manufacturing

industry contraction

in the fourth quarter

of 2020.

Prompt Manufacturing Index (PMI) – Bank Indonesia

The higher PMI-BI is congruent with the latest manufacturing industry developments in the

fourth quarter of 2020, as reported in the Bank Indonesia Business Survey, with the corresponding

weighted net balance (WNB) improving to -0.47% from -1.45% in the previous period. In addition,

respondents predicted further improvements in the first quarter of 2021, as reflected by another bump

in the WNB to 0.80% (Graph 2).

Most components contributed to the higher PMI-BI recorded in the fourth quarter of 2020, led

by production volume which improved to 49.94% despite remaining in a contractionary phase.

Moreover, the PMI-BI was also boosted by a seasonal surge of public activity during the Christmas and

New Year festive period that stoked demand and supported by the availability of production facilities.

A. Production Volume

In the fourth quarter of 2020, the Production Volume Index remained at a contractionary level

of 49.94%, despite improving from 45.35% in the third quarter of 2020 on the back of growing seasonal

demand during the Christmas and New Year festive period. The Production Volume Index increased in

line with faster supplier delivery times as an indicator of supporting materials for production.

Furthermore, respondents predicted production volume to move into an expansionary phase in the

first quarter of 2021 with a reading of 51.32% (Graph 3).

Most components

contributed to the

higher PMI-BI in

the fourth quarter

of 2020..

The higher PMI-BI

is congruent with

the latest

manufacturing

industry

developments

reported in the

Bank Indonesia

Business

Survey.based on

the Business Survey (SKDU).

Prompt Manufacturing Index (PMI) – Bank Indonesia

*expectation

B. Order Volume

In the fourth quarter of 2020, the Order Volume Index retreated below the 50-point threshold

that separates expansion from contraction in the manufacturing sector at 49.33% compared with

50.55% in the previous period, held back by most subsectors, Wood Products and Other Wood

Products in particular. Respondents explained that order volume had increased in the previous period

in preparation for strong seasonal demand during the Christmas and New Year festive period.

In the first quarter of 2021, respondents predicted an expansionary Order Volume Index at

55.52% (Graph 4), affecting various subsectors such as Food, Beverages and Tobacco, Fertilisers,

Chemicals and Rubber Products, as well as Paper and Printing.

*expectation

C. Inventory

Consistent with higher production volume, respondents also confirmed an improvement in

the Inventory Index from 43.87% in the third quarter of 2020 to 46.78% in the fourth quarter of 2020,

which is still in a contractionary phase. Nevertheless, respondents expected the Inventory Index to

move into expansionary territory in the first quarter of 2021, with a reading of 52.55%, in line with

increasing production volume (Graph 5).

50%

50%

Prompt Manufacturing Index (PMI) – Bank Indonesia

*expectation

D. Labour

In line with higher production volume, the Labour Index improved to 44.95% in the fourth

quarter of 2020 from 41.03% in the previous period yet remained in a contractionary phase.

Notwithstanding, respondents predicted further gains in the first quarter of 2021, with a contractionary

index of 48.35% (Graph 6).

*expectation

E. Supplier Delivery Time Index

Supported by smooth distribution and supply, the Supplier Delivery Time Index recorded a

modest improvement in the fourth quarter of 2020 with a reading of 42.27% (Graph 7), while

respondents predicted further gains in the first quarter of 2020 to a level of 44.89%.

50%

50%

Prompt Manufacturing Index (PMI) – Bank Indonesia

*expectation

Most manufacturing subsectors achieved fourth-quarter gains in 2020, with several industries

moving into expansionary territory, led by Fertilisers, Chemicals and Rubber Products (51.44%), followed

by Paper and Printing (50.50%).

Respondents expected most manufacturing subsectors to move into an expansionary phase

in the first quarter of 2021, including Food, Beverages and Tobacco (54.26%) on maintained demand

along with adequate raw materials for production, Fertilisers, Chemicals and Rubber Products (54.21%)

as well as Paper and Printing (51.20%) (Graph 8).

50%

52.4750.44

48.0048.83

54.26

49.71

45.19

39.43

43.45

49.92 50.36

42.59 40.49

38.39

43.8249.01

42.03

46.37

50.5051.20

51.48

44.48 45.88

51.44

54.2157.43

40.26

48.49

49.17

52.5050.53

36.8941.32

48.99

42.39

47.14

41.28

45.50

42.41

48.18

15.00

25.00

35.00

45.00

55.00

65.00

75.00

I II IIIIV I II IIIIV I II IIIIVI* I II IIIIV I II IIIIV I II IIIIVI* I II IIIIV I II IIIIV I II IIIIVI* I II IIIIV I II IIIIV I II IIIIVI* I II IIIIV I II IIIIV I II IIIIVI* I II IIIIV I II IIIIV I II IIIIVI* I II IIIIV I II IIIIV I II IIIIVI* I II IIIIV I II IIIIV I II IIIIVI*

2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 20202021

Makanan, Minuman &

Tembakau

Tekstil, Brg Kulit & Alas

Kaki

Barang Kayu & Hasil

Hutan lainnya

Kertas dan Barang

Cetakan

Pupuk, Kimia & Barang

dari Karet

Semen & Barang Galian

Non Logam

Logam Dasar Besi & Baja Alat Angkut, Mesin &

Peralatannya

(%, Indeks)

Most manufacturing

subsectors achieved

fourth-quarter gains

in 2020.

Respondents

expected most

manufacturing

subsectors to move

into an

expansionary

phase in the first

quarter of 2021.

Prompt Manufacturing Index (PMI) – Bank Indonesia

APPENDIX

Prompt Manufacturing Index (PMI) – Bank Indonesia

Food, beverages and tobacco 44.45 52.57 48.34 48.61 48.95 62.13 55.22 62.74 52.19 54.95 52.35 52.47 50.44 35.30 48.00 48.83 54.26

Textile, leather products and footwear 48.56 51.27 49.28 49.24 53.24 55.46 51.94 60.22 49.42 50.95 50.53 49.71 45.19 19.10 39.43 43.45 49.92

Wood products & other wood products 47.26 51.91 48.58 48.58 53.03 55.53 52.08 53.18 47.61 45.97 48.51 50.36 42.59 19.75 40.49 38.39 43.82

Paper & printing 48.98 51.38 54.13 48.79 48.55 55.89 60.54 53.50 54.06 52.75 54.34 49.01 42.03 24.11 46.37 50.50 51.20

Fertilizers, chemicals and rubber products 52.02 48.89 54.89 50.69 50.89 55.40 53.18 51.75 49.88 53.34 55.84 51.48 44.48 34.71 45.88 51.44 54.21

Cement and non metalic mineral products 46.14 54.24 48.87 48.98 47.03 50.44 52.68 56.77 50.53 47.49 53.19 57.43 40.26 25.76 48.49 49.17 52.50

Iron and basic steel 52.66 55.30 57.74 51.13 55.38 54.41 54.25 54.43 43.94 48.70 50.05 50.53 36.89 27.81 41.32 48.99 42.39

Transport equipment, machinery & apparatus 47.59 51.02 49.90 44.42 41.61 52.32 52.31 63.20 51.40 52.57 53.01 47.14 41.28 24.63 45.50 42.41 48.18

Prompt Manufacturing Index (PMI) – Bank Indonesia

METHODOLOGY

PMI – BI is a composite indicator providing an overview of manufacturing sector performance in Indonesia. PMI-BI is

comprised of five other indices, namely new order volume (input), production volume (output), employment, supplier

delivery times and inventories. PMI is calculated based on a pre-assessment of benchmarked Purchasing Manufacturing

Indices from a number of other countries. An index reading of above 50 signals business expansion, while a reading of

below 50 indicates a contraction. PMI-BI second quarter is calculated from 698 respondents in the manufacturing sector.