RRI.CO.ID, Jakarta - Indonesia’s manufacturing activity contracted in June 2026 as weakening domestic and export demand pushed the country's Purchasing Managers' Index (PMI) below the expansion threshold, prompting the government to strengthen measures aimed at restoring industrial competitiveness. According to the latest report from S&P Global, Indonesia’s Manufacturing PMI fell to 46.9 in June, down from 50.0 in May. The decline was driven by weaker new orders from both domestic and overseas markets, leading manufacturers to scale back production, raw material purchases, and hiring.

Manufacturers also faced mounting production costs due to rising raw material prices and the depreciation of the rupiah. As a result, input cost inflation reached its second-highest level since the PMI survey began in 2011. “We should view this situation as a challenge that must be addressed by strengthening policies to enhance the competitiveness of Indonesia’s manufacturing sector,” Ministry of Industry spokesperson, Febri Hendri Antoni Arief, said in Jakarta on Wednesday, July 1, 2026.

According to him, the June PMI decline was primarily caused by weaker demand and higher production costs. The government's immediate priority is to ensure strategic policies are effectively implemented to reduce industrial costs and support a recovery in manufacturing activity.

One of the key measures is the implementation of the Specific Natural Gas Price (HGBT) program, which provides lower natural gas prices for industries that rely on gas as a major energy source or production input.

“The policy has already benefited manufacturers by improving production efficiency and maintaining the competitiveness of Indonesian manufactured products. Its implementation should continue to be strengthened so that more eligible industries can fully benefit,” he said.

On June 29, the government decided to reduce the price of regasified liquefied natural gas (LNG) for industrial users to US$13 per MMBTU, down from around US$20–23 per MMBTU. The measure is intended to preserve industrial competitiveness while helping companies avoid layoffs.

“The reduction in regasified LNG prices is positive news for manufacturers and represents one of the solutions to bring Indonesia’s Manufacturing PMI back into expansion territory in the coming months,” Febri said.

He also stressed that protecting domestic industries has become increasingly important amid growing global economic challenges. Such protection is not only intended to safeguard businesses but also to preserve employment and reduce the risk of job losses.

“At a time when competing countries continue to pursue expansionary policies, the government will not stand still. Through close coordination among ministries and government agencies, we will continue working to create a more conducive business environment,” he said.

The government believes that protecting domestic industries is fundamental to strengthening Indonesia’s competitiveness and expanding opportunities in both export and domestic markets.

Beyond the HGBT program, the Ministry of Industry is accelerating several strategic initiatives, including increasing the use of locally made products, facilitating manufacturing investment, protecting the domestic market from unfair trade practices, and expanding exports to non-traditional markets. These policies are designed to sustain industrial utilization rates and improve the competitiveness of Indonesia’s manufacturing sector amid global economic uncertainty.

Despite the contraction in June, the Ministry noted that the S&P Global survey showed manufacturers became more optimistic about business prospects over the next 12 months compared with the previous month, supported by expectations of easing cost pressures and improving market demand.