Jakarta – Indonesia's economy showed signs of resilience in September, with inflation remaining within the central bank's target range, the trade balance posting a larger surplus in August and manufacturing activity returning to expansion, according to three macroeconomic indicators released on Thursday.
Annual inflation stood at 3.28% in September 2026, within the government's target range of 2.5% +/- 1%. Core inflation eased to 2.84%, indicating that inflation expectations remained anchored and price stability was maintained amid global and domestic volatility.
Administered-price inflation also eased to 3.25% year-on-year, supported by the normalization of mobility after the school holidays, which curbed airfares, and the relatively limited impact of adjustments to non-subsidized fuel prices.
Meanwhile, volatile food inflation reached 5.03% year-on-year, driven by demand dynamics and lower production of several horticultural commodities due to extreme weather, El Nino and natural disasters.
Inflation remaining within the target range reflects the effectiveness of policy coordination between the central government, Bank Indonesia and regional administrations through the Central Inflation Control Team (TPIP) and Regional Inflation Control Teams (TPID).
The government remains vigilant about price pressures in the volatile food category and continues to coordinate efforts to ensure adequate supplies, smooth distribution and affordable prices for consumers.
Entering the fourth quarter of 2026, the government is strengthening its policy mix to keep inflation under control while supporting household purchasing power. Measures include disbursing the third phase of the Family Hope Program (PKH), distributing 10 kilograms of rice assistance per month from October to December 2026, and accelerating the distribution of medium-grade rice under the Food Supply and Price Stabilization (SPHP) program by state-owned logistics company Bulog.
Supply stability will also be supported through the Affordable Food Movement (GPM), stronger Government Rice Reserves (CBP) and more effective interregional cooperation agreements (KAD).
On the production and distribution side, the government is seeking to improve logistics efficiency and mitigate imported inflation risks. Measures include imposing zero import duties on industrial liquefied petroleum gas (LPG) and aircraft spare parts, while similar policies are being prepared for plastic raw materials. Financing support for productive sectors will also be strengthened through the People's Business Credit (KUR) program.
Following Coordinating Economic Affairs Minister Airlangga Hartarto's directives at the 2026 National Inflation Control Coordination Meeting on Sept. 24, the government is also stepping up preventive measures to strengthen food security. These include optimizing water management and irrigation networks, accelerating planting schedules and adjusting cropping patterns, utilizing productive land, mapping vulnerable areas and strengthening early warning systems.
These measures are intended to maintain food production and distribution while keeping prices stable through the end of the year.
Trade surplus widens in August
Alongside price stability and stronger food security, Indonesia's external sector continued to record a trade surplus, reaching a cumulative $7.25 billion in January-August 2026.
The surplus was supported by a $28.54 billion surplus in non-oil and gas trade, which offset a $21.29 billion deficit in oil and gas trade. The energy trade deficit reflects substantial domestic energy demand, although its continued decline since June points to progress in strengthening energy resilience, particularly following the implementation of the B50 biodiesel mandate on July 1, 2026.
In August, the trade surplus widened significantly to $3.55 billion from $120 million in July, marking the second consecutive monthly surplus.
The improvement was driven by an increase in the non-oil and gas surplus to $6.09 billion from $3.10 billion, alongside a narrowing of the oil and gas deficit to $2.54 billion from $2.98 billion.
Non-oil and gas exports were supported by several major commodities. During January-August 2026, exports of iron and steel rose 4.88% to $19.18 billion, exports of crude palm oil (CPO) and its derivatives increased 6.57% to $17.75 billion, and coal exports grew 4.31% to $16.58 billion.
Manufacturing exports increased 6.62%, making the sector the main contributor to export growth and reflecting continued progress in downstream industrial development.
On the import side, raw and intermediate materials accounted for $133.38 billion, while capital goods totaled $36.74 billion during the first eight months of 2026. Together, the two categories represented 91.3% of total imports, while consumer goods accounted for just 8.7%.
Imports of machinery and mechanical equipment rose 15.26% year-to-date, while imports of electrical machinery and equipment increased 22.94%. The increases indicate growing demand for production inputs and capital goods in line with domestic manufacturing and investment activity, supporting the sustainability of industrial production.
Consistent with the improvement in trade and industrial activity, Indonesia's manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 52.4 in September from 49.8 in August.
The index returned to expansion territory, signaling the strongest improvement in business conditions since February 2026.
The recovery was driven by increases in new orders and production, continued export growth for a second consecutive month, new projects and improving purchasing power.
New orders grew at their fastest pace since February, while export orders recorded their strongest growth since May 2022.
As production increased, employment returned to growth, while manufacturers stepped up purchases and increased input inventories. Cost pressures also began to ease, with input and output price inflation slowing to their lowest levels in six months.
Business confidence in production prospects over the next 12 months remained high, supported by expectations of sustained domestic demand, export growth and new projects.
With production, demand, exports and employment improving, manufacturing is expected to remain one of the drivers of Indonesia's economic growth.
"The government continues to maintain a balance between economic stability and growth. Controlled inflation, the manufacturing sector's return to expansion and continued export growth show that Indonesia's economic foundations remain strong amid persistent global uncertainty," Airlangga said.
"Going forward, the government will continue to strengthen policy coordination to safeguard purchasing power, encourage investment and industrial activity, and improve the competitiveness and added value of Indonesian products," he added.
Overall, contained inflation, a sustained trade surplus and manufacturing's return to expansion point to improving economic conditions in Indonesia.
The government will continue to pursue anticipatory and responsive policies to sustain this momentum, protect household purchasing power, strengthen industrial competitiveness and support the country's economic outlook.