Indonesia's manufacturing activity shrinks for fourth straight month

JAKARTA (Reuters) - Indonesia's manufacturing activity shrank for the fourth straight month in Janaury but at a slower pace, indicating the industry could be stabilising, the HSBC Markit purchasing managers' index (PMI) survey showed on Monday.

The HSBC Markit Purchasing Managers' Index (PMI) increased slightly to 48.5 in January from 47.6 in December, which was the lowest reading since the beginning of the survey in 2011.

But it was still below the 50 level which separates contraction from expansion.

Output and new orders continued to fall, though at slower rates, but export orders fell at the sharpest rate since the survey began in early 2011.

"There are still signs that, while manufacturing sector conditions are likely to remain soft in the upcoming months, the sector is stabilizing," said Su Sian Lim, economist at HSBC.

Lim added that continued low oil prices should help revive the manufacturing sector. "Against this backdrop, we expect to see Bank Indonesia leaving its monetary policy settings unchanged over 2015," Lim said.

The central bank hiked its interest rate in mid-November last year following the government's decision to slash fuel subsidies. Bank Indonesia (BI) has maintained its 7.75 percent interest rate since then.