In the month of Ramadan, the manufacturing industry begins to grow

An index reading above 50 indicates that the industry is in a position of expansion. Meanwhile the index below shows the opposite.

IKI is an indicator of the condition of the processing or manufacturing industry sector that is released every end of the month by the Ministry of Industry since November 2022. Every company from various industrial sub-sectors is required to send their company's condition data which is then processed into IKI.

The indicator variables measured are new orders, production and product inventory.

The increase in IKI in March was influenced by an increase in the inventory of products and new orders. The product inventory index rose 1.35 points to 55.63, the highest since IKI was released in November 2022.

The index of new order variables also increased by 1.11 points to 54.25. The stabilization of the conditions in the United States and China as major trading partners is thought to have driven the increase in orders.

"This condition shows that processed industry products are optimally absorbed in the market, especially in the domestic market. The moment of Ramadan is one of the drivers of optimal absorption of industrial products, considering that since the beginning of 2024, the instability of the global economy has been pressing down on Indonesian processing industry orders and production," said the Spokesperson of the Ministry of Industry, Febri Hendri Antoni Arif, in Jakarta, on Thursday (28/3/2024).

Production variables fall

However, production variables actually decreased by 1.12 points or contracted to a level of 49.33, the first time this has occurred since the release of IKI. This is suspected to have happened because producers decided to deplete the stock of products that had accumulated since the end of 2023.

In addition, the general condition of business activities in March 2024 slightly decreased compared to February 2024. This can be seen from the decrease in the number of respondents who answered that their business conditions improved and stabilized, from 76.8 percent to 76.4 percent.

Nevertheless, business optimism for the next six months continues to rise from 71.0 percent to 72.3 percent. This is the highest value since the release of IKI.

The sub-sector of paper and paper products industry has the highest level of optimism, followed by printing and reproduction of recorded media and food industry. Some dominant factors for business optimism are the existence of central government policies, economic conditions, the global market, and a better domestic market.

Apart from that, seasonal factors in the month of Ramadan and the upcoming Eid al-Fitr holiday also support increased optimism among industry players.

Indicator

Contacted separately on Thursday, Vice Chairman of the Chamber of Commerce and Industry (Kadin) for Agrarian, Spatial, and Regional Affairs, Sanny Iskandar, said that the increase in IKI indicates that the domestic manufacturing industry is in a good and continuously expanding position.

"The manufacturing industry continues to run and grow following the economy which is also still growing," he said.

Also read: Indonesians pay Zakat diligently, the amount increases every Ramadan

This, Sanny continued, also shows that domestic manufacturing production can be absorbed in the domestic market. Especially since the Lebaran moment always drives public demand and is utilized by the business world to increase its production.

He said that this positive development could continue after Lebaran. With the election being over, the business world can obtain business certainty and continue its expansion.

The Executive Director of the Center of Reform on Economics (CORE), Mohamad Faisal, says that business income during this year's Eid al-Fitr festivities was better than last year. This is reflected in the retail sales index released by Bank Indonesia (BI).

Last year, many real sectors still contracted even during the Eid moment. For example, fuel sales, telecommunications, and household equipment sales. However, this year, everything is recorded as growing.

"This indicates that Eid is encouraging the absorption of domestic manufacturing production," said Faisal.

Also read: Cash has not yet been replaced by digital, banks ensure its availability

This is a good opportunity for the manufacturing industry because the global market is still slow. Moreover, Indonesia's main trading partner, China, is still experiencing an economic slowdown.

As the global market slows down, the manufacturing industry can optimize the domestic market. Especially during the momentum of Eid al-Fitr, there is a push for an increase in public spending, one of which is the issuance of holiday allowance (THR).