The Industrial Confidence Index remained above the expansion threshold in June, highlighting the resilience of Indonesia’s manufacturing sector despite mounting cost pressures and softer demand.
Indonesia’s manufacturing sector continued to show resilience in June 2026, with the Industrial Confidence Index (IKI) standing at 52.90, remaining above the 50-point threshold that signals expansion. Although the reading declined by 0.66 points from the previous month, it suggests that manufacturers remain optimistic despite facing increasingly complex domestic and global challenges.
The Ministry of Industry said manufacturers encountered a more difficult operating environment in June than in May. In addition to higher production costs, companies also reported weaker demand, creating a double challenge that slowed business activity. Rising import prices for raw materials, driven by geopolitical tensions in the Middle East and a weaker rupiah, increased production costs, while power outages in several industrial estates disrupted factory operations.
Key Facts
- Industrial Confidence Index (June 2026): 52.90
- Monthly change: -0.66 points
- Expansion threshold: 50.0
- Status: Manufacturing remained in the expansion phase.
Despite these headwinds, policymakers see several factors supporting industrial activity. The recent reduction in regasified LNG-based industrial gas prices from US$23 to US$13 per MMBtu is expected to lower energy costs for manufacturers participating in Indonesia’s regulated industrial gas pricing scheme. At the same time, stronger non-oil export demand and government spending programs—including the Free Nutritious Meals initiative, the B50 biodiesel mandate, and rural development projects—are expected to sustain domestic demand for manufactured goods.
The divergence between the IKI and the S&P Global Manufacturing PMI, which fell into contraction territory in June, reflects the difference in methodology. While the PMI primarily measures month-to-month business conditions among purchasing managers, the IKI captures broader business sentiment across domestic manufacturers. Together, they suggest that confidence remains relatively intact even as near-term production activity softens.
The latest IKI indicates that Indonesia’s manufacturing sector continues to benefit from a large domestic market and supportive industrial policies. However, persistent pressures from exchange-rate volatility, energy costs, and weakening demand underscore the need for continued policy support to preserve industrial competitiveness and maintain the sector’s contribution to economic growth.