The Nikkei Indonesia Manufacturing PMI dropped to 49.9 in January of 2019 from 51.2 in the previous month. The reading pointed to the first contraction in the manufacturing sector since January 2018, as new orders shrank at the fastest rate in 1-1/2 years and new export orders fell for 14th straight month. At the same time, output was broadly unchanged, while employment grew the least since June 2018 and buying activity rose marginally. Meanwhile, there were further signs of destocking activity, due to a lack of output growth, higher costs and efforts to maintain lean stocks.

On the price front, the recent appreciation of the rupiah was instrumental in bringing down cost pressures. Input price inflation hit the lowest since the survey began in near eight years ago, which contributed to a mild rise in output prices. Looking ahead, sentiment remained buoyant.