The Nikkei-Markit purchasing managers’ index for Indonesia dropped to 48.4 in July, a drop of 2.5 index points from June and falling below the 50-point line separating growth from contraction.

Firms noted weak domestic demand, which combined with a fall in export orders, pulled down total new business. In response, output levels also dipped.

Markit economist Pollyanna De Lima said that while the sector might be back in reverse gear, “it is not all doom and gloom for Indonesia’s economy as a lack of inflationary pressure provides the [central bank] with room for further rate cuts later in the year.”

In July, Bank Indonesia maintained its reference rate at 6.5 percent, and kept its seven-day reverse repo rate at 5.25 percent, subverting analyst expectations for more easing after the central bank cut interest rates in June.

The manufacturing situation was better in Vietnam, where a Nikkei gauge came in at 51.9 for July—an eighth straight month of growth in business activity. This however, was a down from a reading of 52.6 last month.

Markit economist Andrew Harker said the latest Vietnam manufacturing data were open to interpretation: observers could focus on the sector’s continued growth, or its deceleration. But he added that the loss of momentum “follows a pattern that has been seen across much of the past year, with growth picking up and then slowing again a few months later, without a sustained period of strong expansion.”