Manufacturing activity in Indonesia contracted in January for the first time since May even though new export orders rose, a HSBC’s Markit survey showed on Friday.
The January purchasing managers’ index was 49.7, compared with 50.7 in the previous reading and a record high of 51.5 in November.
A reading above 50.0 signals expansion and a reading below the level means contraction in manufacturing activity.
The PMI reading for May 2012 was 48.1. Since then, the levels were always above 50, until January.
In January, total new business increased only “fractionally” while raw material shortages resulted in firms lowering both pre- and post-production inventories, the survey said.
However, the respondent said exports demand has strengthened, so new export orders continued to grow in January though at a moderate pace.
“Strong export orders appear to have offset a moderation in domestic orders, which may have been partially impacted by the Jakarta floods,” said Su Sian Lim, economist at HSBC, adding that the jump in input prices is somewhat more disconcerting.
Torrential monsoon rain on Jan. 17 triggered severe flooding in the capital, forcing many business and government offices to close.
According to the report, around one-third of surveyed firms said they faced higher purchase costs for electricity, metal and general raw material.
“This suggests that the February survey could reveal even greater inflationary pressure, as the impact of the flood will be fully reflected,” Lim said.
The floods disrupted food distribution, which contributed to pushed the annual inflation rate in January rising to 4.57 percent from 4.3 percent in December.