Jakarta, CNBC Indonesia – Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance, Febrio Kacaribu, explained that the purchasing managers’ index (PMI) for Indonesian Manufacturing in July 2021 decreased to 40.1. One of the factors is the imposition of restrictions on community activities (PPKM).
The decline in the Manufacturing PMI to level 50 indicates a contraction in manufacturing sector activity. The rate of contraction in July was the first time after 9 months of expansion. If the PMI is above the 50 level, it means that the manufacturing industry is still expansive, but when it is below that, the opposite is true.
The July Manufacturing PMI of 40.1 decreased from June 2021 which was 53.5 and was the deepest level of decline since June 2020 which was 39.1. Although it is still far from the Manufacturing PMI when the PSBB was implemented in April 2020, which was 27.5.
The government responded quickly to the increase in Covid-19 cases due to the spread of the Delta variant by pressing the brakes on tightening restrictions. The implication is that community activities will decline during July 2021.
“Activity in the national manufacturing sector as reflected in the manufacturing PMI indicator has also decreased,” said Febrio in his official broadcast, Monday (2/8/2021).
In detail, Febrio explained that the decline in the Manufacturing PMI was caused by a decrease in output and new demand due to production and demand constraints.
New export demand declined for the first time in four months. This shows that demand at the global level is also declining due to the escalation of Covid-19 and the spread of the Delta variant in several countries.
The company responded by reducing activities and workforce in line with the implementation of Level 4 community activity restrictions (PPKM).
The government realizes the importance of controlling Covid-19 to continue to maintain the momentum of economic recovery. Stepping on the activity restriction brake is a choice that must be made to prevent the spread of contagion.
Therefore, said Febrio, the PPKM Level 4 policy is a necessary step so that the transmission of Covid-19 does not escalate and the pandemic curve can return to decline.
“This mobility restriction policy is temporary and continues to be evaluated periodically to adjust the restriction level according to the development of pandemic control parameters,” explained Febrio.
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