Indonesia’s manufacturing sector showed resilience amid ongoing global and domestic challenges, supported by policies that boosted production activity. The Industry Confidence Index (IKI) for September 2025 was 53.02, still within the expansion zone despite a slight decrease of 0.53 points from August’s 53.55. This is also 0.54 points higher than September 2024’s index of 52.48.

Subsector Production Trends and Expansions

Febri Hendri Antoni Arif, spokesperson for the Ministry of Industry, stated that in August 2025, 19 out of 23 subsectors experienced contraction in production, with only 4 subsectors expanding. In September, production improved significantly, with 12 subsectors expanding and 11 contracting. “This means production activity increased due to high demand, supported by availability of raw materials and technology,” he said.

Eight subsectors shifted from contraction in August to expansion in September. These include tobacco processing; leather, leather goods, and footwear; wood and cork products excluding furniture; chemical products; pharmaceuticals and traditional medicines; motor vehicles, trailers, and semi-trailers; other transportation equipment; and furniture manufacturing. The increase was attributed to seasonal industry factors, higher demand, and reduced inventory.

Factors Influencing Production and Order Activity

The slight IKI slowdown was influenced by lower order and inventory indices, though both remained in expansion. The order index was 53.79, driven by relatively stable domestic demand but down 3.59 points from August’s 57.38. Inventory fell by 1.18 points to 55.86, indicating stock absorption due to rising orders. Production rose by 5.01 points but remained in contraction at 49.85.

Febri noted that production contraction had lasted four months but September’s improvement signals early recovery, with businesses cautiously increasing activity amid demand uncertainty.

Export and Domestic Market Confidence in Manufacturing

The export-oriented IKI in September reached 53.99, a slight 0.12-point decrease from August but still in expansion, showing steady foreign demand. The domestic-oriented IKI stood at 51.92, down 0.72 points from August but also expanding, reflecting positive domestic economic conditions.

Despite the slower IKI, business optimism increased. Optimism for the next six months rose to 69.6% from 68.1%, while pessimism fell to 6.1% from 6.6%.

Outlook and Industry Optimism

Febri emphasized the importance of maintaining expansion trends with consistent pro-industry policies. He said lower benchmark interest rates from The Fed and Bank Indonesia offer industry access to financing and market expansion. He added that political stability, exchange rate, and fiscal support will affect future industry competitiveness.

In September, 77.6% of respondents reported stable or improved business conditions; 31.0% noted improvements (down 1.9%), 46.6% reported stability, and 22.4% indicated deterioration (up 2.2%).

Optimism about business conditions six months ahead increased to 69.6%, stability expectations fell slightly to 24.3%, and pessimism declined to 6.1%.

PHOTO: KEMENPERIN

This article was created with AI assistance.