JAKARTA — Bank Indonesia (BI) projects that Indonesia’s manufacturing industry will remain in an expansionary phase throughout the second quarter of 2026. This positive outlook persists despite recent data from S&P Global showing a contraction in the country’s manufacturing Purchasing Managers’ Index (PMI) for April 2026.
According to the Prompt Manufacturing Index (PMI-BI) report for the first quarter of 2026, the central bank expects the performance of the processing industry to rise to 52.26% in the second quarter. This growth is primarily driven by strong indicators in production volume, finished goods inventory, and total order volume.
“The majority of business sub-sectors are projected to remain in an expansion phase, with the furniture, leather goods, footwear, and food and beverage industries leading the growth,” BI noted in its report on Monday (6/1/2026). This outlook provides a contrast to industry concerns regarding the ongoing threat of layoffs within the manufacturing sector.
During the first quarter of this year, BI recorded a manufacturing performance of 52.03%, an improvement from the 51.86% recorded in the previous quarter. The primary drivers of this expansion include finished goods inventory (54.07%), production volume (54.07%), and total order volume (53.20%).
However, the data also highlights underlying challenges, as two key components fell into the contraction zone—dipping below the 50% threshold. These include the speed of input delivery at 49.06% and total employment at 48.76%. Despite these hurdles, the BI report confirms that most sub-sectors, particularly paper products, printing, and media reproduction, continue to show resilience and expansionary trends.
This optimistic projection from BI follows a more cautious assessment from S&P Global, which reported that Indonesia’s manufacturing PMI fell to 49.1 in April 2026, down from 50.1 in March. Since any reading below 50.0 indicates a decline in operational conditions, this marked the first contraction in the sector in nine months.
Usamah Bhatti, an economist at S&P Global Market Intelligence, attributed the downturn to mounting inflationary pressures linked to ongoing geopolitical tensions in the Middle East. The decline was largely spurred by weakening production activities; output volume has contracted for two consecutive months, reaching its fastest rate of decline in nearly a year.
Market participants have cited a combination of factors for this cooling sentiment, including surging raw material prices, significant supply chain disruptions, and a notable softening in consumer purchasing power. As the industry navigates these headwinds, the balance between BI’s expansionary projections and the S&P Global data remains a critical indicator of Indonesia’s economic trajectory for the remainder of the year.
Summary
Bank Indonesia projects that the manufacturing industry will remain in an expansionary phase throughout the second quarter of 2026, forecasting an index of 52.26%. This growth is expected to be led by the furniture, leather goods, footwear, and food and beverage sectors, driven by strong performance in production volume and order volumes. This positive outlook follows a steady first-quarter performance of 52.03%, reflecting resilience despite challenges in input delivery and employment metrics.
Conversely, S&P Global reports a more cautious outlook, noting that Indonesia’s manufacturing PMI fell to 49.1 in April 2026, signaling the first contraction in nine months. Economists attribute this decline to geopolitical tensions, inflationary pressures, and weakened consumer purchasing power. The industry now faces a complex landscape as it attempts to balance Bank Indonesia’s optimistic growth projections against significant supply chain and market headwinds.
