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PMI Rises, Exports Weaken: Two Faces of Indonesia's Economy Towards End of 2025

As the year draws to a close, Indonesia is once again displaying an interesting combination of economic data: manufacturing is increasingly expansive, yet export performance is weakening. At first glance, this appears out of sync, but in fact both tell the same story—that the domestic economy remains strong amid global slowdown.

For mutual fund investors, understanding these two sides is important for developing the right strategy for 2026.

1. Indonesia's PMI Surges to 53.3 — Strongest Since February
The first signal comes from the manufacturing sector.
The Purchasing Managers' Index (PMI) rose to 53.3 in November, from 51.2 in October. This is the highest level since February 2025.

What is driving this surge?
- Demand & Output Rise Significantly
* Growth in new orders recorded the fastest pace since August 2023
* Factory output increased
* Domestic demand emerged as the main driver
* Although export demand remains weak, the domestic market continues to support production

This condition is quite a contrast with many countries where PMI has stagnated or contracted.
- Companies Increase Activity
* Input purchases grew
* Employee recruitment increased
* Rising workload has created the sharpest backlog since 2021

This is a sign that business optimism is beginning to recover.
- Challenge: Supply Disruption & Costs Rising
* Input deliveries delayed due to weather & logistics disruptions
* Raw material costs and currency pressure drive input-cost inflation to the highest level in 9 months
* Companies respond by raising selling prices (factory-gate prices) to the strongest level in over 1.5 years

2. On the Other Side, Exports Weakened in October 2025
While domestic manufacturing strengthened, export figures turned weaker.
Exports Down –2.31% YoY
After September posted +11.41% YoY, October reversed into decline.
Main causes:
- CPO –1.13% YoY (normalisation of global prices)
- Coal –19.04% YoY (weakening demand + lower prices)

This confirms that the commodity cycle has entered a moderation phase.
But Higher Value-Added Products Remain Strong
Higher-tech manufacturing segments continue to grow:
- Steel +14.58% YoY
- Electrical machinery +28.62% YoY

This means Indonesia's export diversification is beginning to bear fruit.
Monthly Decline More Pronounced
- Exports –1.79% MoM (steeper than –1.14% in September)
- Weakness mainly from precious metals & steel
- Exports to China fell –0.77% MoM as China's PMI weakened
- Shipments to Singapore plummeted 68.04% MoM (Singapore also recorded total imports from Indonesia down 25.67% MoM)

3. What Does This Mean for Mutual Fund Investors?
1. Prospects for Equity Funds Remain Positive for 2026
Strength in domestic consumption and expansive manufacturing activity provide a foundation for earnings growth among non-commodity issuers.
Sectors such as industrials, consumer, transport & logistics may record better momentum.
2. Fixed Income Funds Get Fresh Tailwinds
Cost pressures remain, but if growth stabilises and expectations for global rate cuts strengthen, bonds have the potential to enjoy further yield declines in 2026.
3. Main Risks Continue to Come from Global Factors
China's demand, commodity prices, and global market volatility can still dampen near-term performance — so diversification (a mix of fixed income–equity–money market) remains the healthiest strategy.
4. Momentum in Domestic Investment Worth Leveraging
With PMI continuing to expand and the economy shifting towards higher value-added manufacturing, medium to long-term investors can capture attractive entry points through equity funds and balanced funds.