Indonesia’s Industrial Confidence Index (IKI) remained in the expansion phase at 52.30 in August 2026, although it declined 0.80 points from 53.10 in July (31/08).

The Ministry of Industry said the result reflected continued activity in the national manufacturing sector.

The performance was in line with non-oil and gas manufacturing growth of 5.32 percent year-on-year in the second quarter of 2026, up from 5.14 percent in the first quarter and above national economic growth of 5.29 percent.

“We see the phenomenon that industry is still waiting for changes occurring in the domestic and export markets (wait and see). Although there has been a slight decline in the demand variable, industry is still producing because it sees that the Indonesian and global economies will improve,” Ministry of Industry spokesman Febri Hendri Antoni Arief said at the August 2026 IKI release in Jakarta on Monday.

Indonesia Industrial Confidence Index Shows Broad Manufacturing Expansion

Of the 23 manufacturing subsectors analyzed, 22 remained in the expansion phase while one subsector contracted.

The expanding subsectors accounted for 98.6 percent of non-oil and gas manufacturing GDP in the second quarter of 2026.

The beverage industry and the chemical and chemical goods industry recorded the two highest IKI values in August 2026.

The leather, leather goods and footwear industry was the only subsector to contract.

Production remained the strongest component of the IKI. Its index reached 55.10 in August, increasing 0.55 points from July and marking its highest level since June 2026.

The order index stood at 53.13 and remained in expansion, although it declined 0.67 points from the previous month.

The product inventory index, meanwhile, fell to 46.02, entering contraction after dropping 3.16 points from July.

The contraction in product inventories has continued for three consecutive months, putting the index at its lowest level since January 2024.

Domestic and Export Markets Show Slower Growth

The IKI for export-oriented industries reached 53.09 in August 2026, down 0.86 points from 53.95 in July. The IKI for domestic market-oriented industries also declined 0.86 points, from 51.99 to 51.13.

“The slowdown in both shows that industrial players are facing more selective demand conditions. Therefore, the sustainability of manufacturing activity will be strongly influenced by the industry's ability to maintain markets, production efficiency, and ensure the smooth supply of raw materials and distribution,” Febri said.

Several subsectors recorded significant increases in August. The beverage industry ranked highest, with all of its IKI components in expansion, particularly due to increased orders from the domestic market.

The food industry recorded its highest expansion level in more than two years. This was related to the high vegetable oil price index, which encouraged companies to increase production.

However, product inventories in the food industry remained in contraction because relatively high production had not been fully absorbed by the market.

Leather and Footwear Industry Contracts for Fourth Consecutive Month

The leather, leather goods and footwear industry contracted in August and has remained in contraction for four consecutive months. The contraction mainly occurred in industries oriented toward the domestic market.

“We hope it will soon expand by looking at several opportunities such as the Eid momentum and the ratification of IEU-CEPA. We see enormous export potential to the European Union, especially for the leather and footwear industries, so we must make optimal use of this agreement,” said Sri Bimo Pratomo of the Secretariat of the Directorate General of Chemical, Pharmaceutical and Textile Industries.

Although its production component remained in expansion, the subsector’s order and product inventory components contracted.

The conditions were caused by high shipping costs, limited vessel capacity affecting distribution, changes in consumer preferences toward more durable products, and companies that were no longer producing.

Ministry of Industry Strengthens Domestic Market Protection

The Ministry of Industry is examining subsectors facing pressure based on their specific conditions. The issues vary from demand, raw materials and logistics to competition from imported products and changes in consumer behavior.

The ministry continues to strengthen policies supporting the sustainability and competitiveness of national industry through Technical Considerations, known as Pertimbangan Teknis or pertek.

Responding to concerns from textile industry players that the pertek process could create challenges for business activities, the Ministry of Industry said the policy should be viewed as an effort to maintain a balance between industrial needs and domestic market conditions.

“In our opinion, this pertek is not an obstacle, but rather a driver so that the competitiveness of domestic industries continues to advance,” Sri Bimo said.

Febri said industrial policies need to balance smooth business activities with the development of national industry.

He said this balance is important amid global industrial competition, as other countries also implement policies to protect and develop their domestic industrial capacity.

“In principle, the Ministry of Industry maintains the balance between supply and demand. Therefore, the pertek instrument is still needed to anticipate pressure on demand for domestic industrial products,” he said.

Febri explained that if domestic demand for a product reaches 100 units while national industry can supply only 80 units, the remaining 20 units can be met through imports.

However, imports still need to be controlled so that the volume of goods entering the country does not overwhelm the domestic market.

“If, for example, the imports that come in are not 20 but are continuously allowed to come in at 100, making it 120, the domestic market will be flooded,” Febri said.

PHOTO: MINISTRY OF INDUSTRY

This article was created with AI assistance.

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