Power Outages Drag Down Industrial Performance

Indonesia's industrial sector faced significant challenges in June 2026, leading to a decline in the Industrial Confidence Index (IKI).

The IKI dropped by 0.60 points from the previous month to 52.90. The Ministry of Industry attributed this decrease not only to production issues but also to softening demand. Key challenges included rising global energy prices and the weakening rupiah, which increased the cost of raw materials.

A major disruptor was the frequent power outages experienced in June. These outages forced many factories and industrial areas to halt production, significantly impacting output. Additionally, the rising price of gas, particularly from LNG regasification, presented another hurdle for industries.

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In June, the challenge (for industry) was not only production but also demand.

Despite these obstacles, the Ministry of Industry acknowledged efforts by the government and parliament to reduce regasification gas prices to $13 per MMBTU, a move seen as beneficial for industries reliant on gas. The sector also grappled with declining consumer purchasing power, partly due to increased non-subsidized fuel prices, which affected demand for manufactured goods.

However, the Ministry of Industry expressed optimism about the sector's resilience, citing strong domestic demand as a key support. Government spending on priority programs, such as free nutritious meals, village cooperatives, and fishery villages, is expected to further boost demand for manufactured products, bolstering the domestic market.

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That, in our opinion, is one of the supports for the increase in domestic demand.