The demand and availability of raw materials have become a problem, as demand is based on the people's purchasing power
Jakarta (ANTARA) - Indonesia's manufacturing sector is highly dependent on domestic consumption, so the declining purchasing power of people owing to the COVID-19 pandemic has suppressed Indonesia’s Purchasing Managers' Index (PMI), Industry Minister Agus Gumiwang Kartasasmita stated.

"Based on our assessment, 70 percent of manufacturing production was absorbed by the domestic market. When the people's purchasing power is under pressure, there is no demand, so companies must automatically adjust to the situation, including to drastically lower its utility," Kartasasmita stated here on Wednesday.

This will impact the supply chain for its derivative industries that still depend on large-scale industries or its parent industry, he pointed out.

"The demand and availability of raw materials have become a problem, as demand is based on the people's purchasing power," Kartasasmita remarked.

The minister cited the example of India’s industry sector that also depends on domestic consumption, and its PMI had fallen off the cliff to 27.4.

However, Kartasasmita remarked that Indonesia's PMI will increase after relaxation of large-scale social restrictions (PSBB) imposed in some regions, so that economic activities and the people's purchasing power can normalize.

IHS Markit announced on Monday that Indonesia’s PMI had dropped to 27.5, from 45.3 recorded in March, indicative of the sharpest contraction on record, as measures to contain the coronavirus pandemic led to factory closures and slumping demand.

Survey data indicated the most severe lengthening of delivery times since the series began owing to a combination of supplier factory shutdowns and transportation restrictions.
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