Indonesia’s manufacturing PMI dropped to 46.9 in June 2025, driven by weak demand and delayed pro-business policies.
Jakarta, July 1, 2025 – Indonesia’s manufacturing sector faced a slight downturn in June 2025, with the Purchasing Managers’ Index (PMI) dropping to 46.9 from 47.4 in May, signaling continued contraction. This decline aligns with similar trends across ASEAN nations, including Malaysia (48.6), Thailand (49.5), Vietnam (45.6), and Singapore (49.6), reflecting regional economic challenges.
According to the Ministry of Industry, two primary factors contributed to the PMI decline. First, industrial companies are awaiting pro-business deregulation policies to counter the influx of cheap imported goods flooding the domestic market. Second, weakened demand in both export and domestic markets, coupled with reduced purchasing power, has strained the sector. “The contraction in June stems from delays in pro-business policies and declining demand domestically and abroad,” said Febri Hendri Antoni Arief, Ministry of Industry spokesperson.
Awaiting Pro-Industry Policies
Manufacturers are particularly eager for revisions to Trade Regulation No. 8 of 2024, announced on July 30, 2025, aimed at tightening import controls on finished goods. This policy is expected to protect domestic products, especially in textiles, apparel, and accessories, with positive impacts anticipated within two months. “The policy rollback on import relaxation is a positive signal, particularly for the textile and apparel industries,” Febri noted.
Additionally, businesses await restrictions on entry ports for cheap imported goods, which currently enter through multiple ports, undercutting local products. This measure is expected to boost domestic demand by reducing competition from low-cost imports. The signing of the Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA) is also highly anticipated, as it could open European markets for Indonesian exports, fostering optimism among export-oriented firms.
Market and Purchasing Power Challenges
Beyond policy delays, weakened market demand and declining consumer purchasing power have further pressured the manufacturing sector. Global trade tensions continue to impact export markets, pushing manufacturers to rely more on domestic consumption, which is already strained by cheap imports. Meanwhile, middle- and upper-income consumers are prioritizing savings over spending on secondary or tertiary goods.
Government spending on infrastructure and school holiday incentives, starting mid-June, has provided some relief for industries like ceramics, cement, glass, steel, food, beverages, paper, and textiles. “Government incentives and increased demand during the new school year should gradually boost manufacturing,” Febri added.
Regional and Global Context
Usamah Bhatti, an economist at S&P Global Market Intelligence, noted that Indonesia’s manufacturing downturn deepened in mid-2025 due to weak demand, leading to reduced production and sales. “Domestic market sales have particularly declined, prompting firms to cut jobs and purchasing activities,” Bhatti said, adding that business confidence has hit an eight-month low. Other ASEAN countries like Vietnam (48.9), Malaysia (49.3), and Myanmar (49.0), along with global players like the UK (47.7), France (47.8), South Korea (48.7), and Germany (49.0), also reported PMI contractions.
Despite challenges, the government’s recent policy announcements signal hope for a recovery in Indonesia’s manufacturing sector by late 2025.