economy

The Performance Of The Domestic Industry Is Rising Due To Local Demand

Seventy-five percent of domestic manufacturing products are sold within the country. The ratio of domestic market orientation to export market is 75:25. The Industrial Confidence Index (IKI) team from the Ministry of Industry concludes that the manufacturing sector's performance, which is generally still expanding despite global instability, is greatly influenced by the stability of the economy and purchasing power domestically.

In November 2024, the Industrial Confidence Index reached 52.95 (indicating expansion), an increase of 0.20 points from October 2024 and up 0.52 points from November of the previous year. "The rise in the IKI for October is supported by the expansion of 21 subsectors, contributing 99.3% to the Non-Oil and Gas Manufacturing GDP in the second quarter of 2024," said Febri Hendri Antoni Arif, spokesperson for the Ministry of Industry, in a written statement on Thursday (28/11).

The increase in the IKI for November is also backed by a rise in the new orders index, which grew by 2.58 points to 54.2, and the inventory index, which, despite a decrease of 1.18 points from the previous month, remains at 54.68. However, the production index in November contracted again after two months of expansion.

The production index slowed down by 2.84 points from the previous month to 49.72. This is due to the strengthening of the US dollar against the Rupiah, leading to higher prices for imported raw materials, while producers sell their products in Rupiah.

Additionally, the increase in the IKI is supported by the positive response from the domestic-oriented industrial sector to the programs of President Prabowo Subianto and Vice President Gibran Rakabuming Raka, such as industrial downstreaming and providing free nutritious food. Meanwhile, export-oriented industries are still facing weakened export demand.

In November, the increase in the IKI value is supported by three subsectors with the highest scores: Electrical Equipment Industry, Beverage Industry, and Printing and Reproduction Media Industry. The completion of PLN projects at the end of the year and the rise in demand for battery chargers for Electric Vehicle Charging Stations (SPKLU) are believed to boost the performance of the electrical equipment industry.

Unlike the Electrical Equipment Industry, the Beverage Industry and the Printing and Reproduction Media Industry's growth is driven by the local elections held across Indonesia at the end of November. The preparations for Christmas and New Year also contribute to the improved performance of the Beverage Industry.

However, two subsectors are experiencing a decline: Other Processing Industry and Repair and Installation of Machinery and Equipment. The Other Processing Industry, which includes exports like false eyelashes, jewelry, toys, sports equipment, and musical instruments, has seen a drop in exports due to the economic slowdown in target countries. In contrast, the Repair and Installation subsector is facing contraction likely due to decreased domestic demand from increased efficiency during global uncertainty.

On another note, the IKI Analysis Team has delved deeper into the IKI values based on market orientation in the manufacturing sector. Overall, it shows that the IKI for domestically oriented industries is better than that for export-oriented ones. The IKI for export-oriented companies is 52.39, while the domestically oriented companies have an IKI of 53.33.

Tag: Electric Vehicle Charging Stations Electrical Equipment Industry Industrial Confidence Index