Jakarta, INTI - The performance of Indonesia’s manufacturing sector entered 2026 on an increasingly positive trajectory. The Industrial Confidence Index (IKI) reached 54.12 in January 2026, rising 2.22 points from December 2025 and marking the highest level since the index was first introduced in November 2022.
“This figure is also 1.02 points higher than in January 2025, indicating stronger confidence among industrial players in business prospects at the start of the year,” said Febri Hendri Antoni Arief, Spokesperson for the Ministry of Industry, in the January 2026 IKI release in Jakarta on Thursday, January 29, 2026.
From a macroeconomic perspective, Bank Indonesia’s decision to maintain the benchmark BI-Rate at 4.75% during its Board of Governors’ Meeting on January 20–21, 2026, is seen as a signal of stability for the business sector. The policy aligns with the government’s efforts to safeguard rupiah exchange rate stability and maintain consistency in achieving the 2026–2027 inflation target of 2.5% ±1%.
Meanwhile, inflation in December 2025 rose to 2.92% year-on-year and 0.64% month-on-month, driven mainly by year-end seasonal factors and supply-side disruptions.
In real-sector developments, Indonesia’s manufacturing activity remains in an expansionary phase. The S&P Global Indonesia Manufacturing PMI stood at 51.2 in December 2025, marking five consecutive months of expansion despite a slowdown compared to the previous month. In line with this trend, Bank Indonesia’s Prompt Manufacturing Index (PMI-BI) for the fourth quarter of 2025 rose to 51.86 and is projected to strengthen further in the first quarter of 2026.
The Ministry of Industry’s spokesperson noted that the structure of the January 2026 IKI reflects broad-based improvement. Out of 23 manufacturing subsectors, 20 subsectors were in expansion, while only three subsectors remained in contraction. The expanding subsectors accounted for 94.7% of the non-oil and gas manufacturing sector’s contribution to Gross Domestic Product (GDP).
“We assess that the increase in the IKI is driven by industrial players intensifying production activities to respond to and meet rising demand ahead of Ramadan, Eid al-Fitr, and other religious holidays,” he explained.
The two subsectors recording the highest IKI values were the Motor Vehicles, Trailers and Semi-Trailers Industry and the Machinery and Equipment Industry. “The increase in IKI figures in these subsectors is also influenced by the positive response of industry players to the letter from the Minister of Industry to the Minister of Finance. However, the proposal is still under discussion between the Ministry of Industry and the Ministry of Finance,” the spokesperson revealed.
Meanwhile, subsectors that remain in contraction include the Leather, Leather Goods and Footwear Industry, the Wood, Wood Products and Cork Industry, and the Computer, Electronic and Optical Products Industry. The contraction in these subsectors has been driven by weaker export demand, seasonal factors, and the impact of global geopolitical conditions.
All IKI Components Remain in Expansion Territory
Based on its underlying components, all IKI variables in January 2026 remained in the expansion zone. The new orders index stood at 55.27, up 2.51 points, while the production index jumped to 54.86, rising 6.45 points after remaining in contraction for seven consecutive months. Meanwhile, the inventory index was recorded at 50.14, although it declined compared to the previous month.
“The return of the production variable to the expansion zone is driven by industries intensively producing goods to meet increased demand for major religious holidays in February and March 2026,” he said.
From the business sentiment perspective, the IKI survey shows that overall business activity remains positive. As many as 78.5% of respondents stated that their business activities had improved or remained stable, an increase from December 2025. Industry optimism also rose to 72.5%, while pessimism declined to 4.5%.
The export-oriented IKI in January 2026 reached 54.62, up 2.26 points from December 2025. Meanwhile, the domestically oriented IKI also improved and stayed within the expansion zone. This reflects that domestic demand continues to be the main pillar supporting industrial performance, amid global market conditions that have yet to fully recover.
Febri emphasized that the strengthening of the IKI was also supported by rising investment realization in the manufacturing sector. In the fourth quarter of 2025, manufacturing investment reached Rp218.2 trillion, accounting for 43.9% of total national investment. The 17.27% year-on-year increase in capital goods imports in November 2025 indicates ongoing capacity expansion and machinery upgrades across the industrial sector.
The Ministry of Industry will continue to reinforce strategic policies to maintain industrial expansion momentum, including strengthening the domestic market, enhancing the competitiveness of export-oriented industries, deepening industrial structures, and accelerating green and digital industrial transformation.
“The January 2026 IKI achievement provides a strong initial foundation for national industries to sustain growth throughout 2026,” he concluded.
Conclusion
The January 2026 Industrial Confidence Index underscores the resilience of Indonesia’s manufacturing sector, supported by strong domestic demand, improving business sentiment, and rising investment. With all key components remaining in expansion territory, the industry enters 2026 with a solid foundation for sustainable growth, despite ongoing global economic challenges.
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