Indonesia’s manufacturing sector stayed in an expansion phase in September 2026 despite global and domestic headwinds, with the Indeks Kepercayaan Industri (IKI) registering at 51.93, according to data released by the Ministry of Industry. While the index remained above the crucial 50 threshold separating expansion from contraction, it marked a slight decline of 0.30 points from August 2026, when the index stood at 52.30.
Factors Driving the September Slowdown
Ministry of Industry Spokesperson Febri Hendri Antoni Arief stated during a press conference at the ministry’s office in Jakarta on Wednesday, September 30, 2026, that the dip in the IKI stemmed from both international pressures and domestic challenges. Global factors included climbing international fuel prices driven by conflicts in the Middle East, which impacted manufacturing production and demand. Domestically, the onset of the Super El Niño weather phenomenon began affecting select industrial subsectors.
According to the Ministry of Industry, businesses adopted a cautious “wait-and-see” approach regarding pending policy changes, incentives, and shifting domestic market conditions. Consequently, many manufacturers held back finished goods in warehouses rather than releasing them immediately, leading to slightly reduced production levels despite steady domestic demand.
Expansion Versus Contraction Across Subsectors
Out of 23 analyzed manufacturing subsectors, 15 recorded expansion in September 2026, while 8 fell into contraction. The expanding subsectors accounted for 84.4% of the non-oil and gas processing industry’s Gross Domestic Product (GDP) contribution during the second quarter of 2026.
The Ministry of Industry identified the beverage industry and the other transport equipment industry as the two subsectors with the highest IKI scores. Conversely, the eight contracting subsectors included:
- Leather, leather goods, and footwear
- Wood, wood products, cork, and plaited goods
- Paper and paper products
- Printing and reproduction of recorded media
- Rubber, rubber products, and plastics
- Computers, electronic products, and optical goods
- Electrical equipment
- Machinery and equipment not elsewhere classified (n.e.c.)
Component Variables and Market Orientation
The IKI calculation rests on three core components: new orders, production, and product inventory. In September 2026, only the new orders variable accelerated, climbing 0.27 points to reach 53.40. Meanwhile, the production component slowed down by 1.32 points to 53.78, and the product inventory component dropped 0.57 points to 45.45, remaining stuck in a contraction phase.
Examining market orientation, export-oriented IKI hit 52.60 in September, continuing an expansion trend that nonetheless slowed by 0.49 points compared to August’s reading of 53.09. Domestically oriented IKI reached 50.94, maintaining growth above the expansion baseline despite dipping 0.19 points from August’s level of 51.13. Overall, 77.9% of surveyed respondents reported that their business conditions remained stable or improved during the month.
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