Indonesia’s Manufacturing Slumps in March 2026 Amid War Impact

In March 2026, Indonesia recorded a score of 50.1 in the Purchasing Managers’ Index (PMI) assessment by S&P Global.

The index, which measures manufacturing performance, is derived from surveys of managers across hundreds of companies in the manufacturing sector. The indicators cover output growth, export and domestic orders, employment levels, supplier delivery times, and inventories of purchased inputs.

The PMI is measured on a scale of 0–100. A reading below 50 indicates contraction, 50 signals no change, and above 50 reflects expansion compared to the previous month.

The March 2026 figure declined significantly from 53.8 in February. According to S&P, the latest reading suggests broadly unchanged operating conditions.

In its report, S&P noted declines in both output and new business in March, partly reflecting the impact of the conflict in West Asia (the Middle East) involving the United States, Israel, and Iran.

“Respondents frequently reported that the conflict in the Middle East affected raw material prices and supply, which in turn disrupted demand and manufacturing output,” S&P said.

Overall weak conditions also led to slower purchasing activity, reduced backlogs of work, and softer employment.

“On the pricing side, input cost inflation increased compared to the previous survey period and reached its highest level since March 2024,” S&P added.

Indonesia’s Manufacturing Output and Demand Decline

March data showed a drop in production after four consecutive months of growth and a sharp increase in February.

Panelists reported that the decline largely reflected shortages of raw materials and rising input costs, partly driven by the conflict in West Asia and broader global economic volatility.

At the same time, new order volumes slowed for the first time in eight months in March, marking a significant shift from the strong expansion seen in the previous survey period.

“Producers noted that weaker demand and increased competition weighed on new business flows. New export orders also declined after rising in February,” S&P said.

The drop in demand eased capacity pressures, allowing firms to complete existing work. As a result, backlogs of work fell for the first time since October.

Meanwhile, weaker sales led to a buildup in post-production inventories, as unsold goods accumulated in stock.

“In line with trends in output and demand, firms reduced their workforce for the second time in three months, albeit only slightly,” S&P said.

At the same time, manufacturers reduced purchasing activity for the first time since July 2025, with higher material prices and supply shortages cited as the main factors.

“Average input delivery times lengthened for the sixth consecutive month, amid reports of material shortages and shipping delays following the outbreak of conflict in the Middle East,” S&P said.

S&P added that the deterioration in supplier delivery times was the most severe since October 2021.

(Read also: Indonesia’s Manufacturing Sector Strengthened in February 2026)