Industrial Confidence Soars as Effect of Unchanged Subsidized Fuel Prices is Felt

Indonesia's manufacturing sector is showing robust signs of expansion, with the Industrial Confidence Index (IKI) climbing to 53.56 in May 2026, up from 51.75 in April. This rise of 1.81 points signals that the national manufacturing industry remains on a growth trajectory, even amidst global economic pressures and a weakening rupiah. The Ministry of Industry attributes this optimism largely to President Prabowo Subianto's steadfast policy of maintaining subsidized fuel prices.

“

The IKI that rose significantly in May is an expression of the optimism of industry players regarding President Prabowo's decision not to raise subsidized fuel prices. This policy keeps inflation under control and supports people's purchasing power, especially for manufactured products, which increases.

This decision has been instrumental in keeping inflation in check and bolstering consumer purchasing power, which in turn stimulates demand for domestic manufactured goods. "The significant increase in IKI this May reflects the optimism of industry players regarding President Prabowo's decision not to raise subsidized fuel prices," stated Febri Hendri Antoni Arief, spokesperson for the Ministry of Industry. He added that this policy has stabilized inflation and strengthened public spending, particularly on manufactured products.

Supporting this positive outlook, Indonesia's annual inflation rate eased to 2.42 percent in April 2026. Concurrently, the Consumer Confidence Index (IKK) remained strong at an optimistic 123.0. These favorable conditions have prompted industries to ramp up production. The production variable within the IKI for May 2026 saw the largest increase, rising 3.86 points to 55.20, its highest level since January 2025. Order volumes also grew, reaching 53.47, while inventory levels stood at 51.33, indicating a healthy expansion across all components of the IKI.

“

Controlled inflation and the IKK remaining at the 123 level show that domestic demand, especially household consumption of manufactured products, is still strong. Industries are responding to this condition by increasing production utilization.

Out of the 23 analyzed industrial subsectors, a remarkable 20 are currently in an expansionary phase, collectively contributing 97.8 percent to the non-oil and gas manufacturing GDP in the first quarter of 2026. The subsectors with the highest IKI values in May were ready-to-wear clothing and paper products. The Ministry also observed increased optimism in both export-oriented and domestic-market industries, with the domestic market showing a more significant rise, underscoring its role as the primary support for national industry amid global uncertainties.

“

The domestic market remains the main strength of Indonesia's manufacturing industry in facing pressure from global uncertainty. People's purchasing power remains strong, increasing demand for domestic products, so industrial production activities also increase.