Indonesia's manufacturing activity continued to contract in July but at a slower pace than the previous month, according to the latest S&P Global Indonesia Manufacturing Purchasing Manager's Index (PMI) released on Friday.

The PMI slid to 49.2 in July from 46.9 in June. A reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 signals contraction.

The decline is attributable to a continued decline in output and new orders, which led to a continued drop in production in June. Output declined for the second straight month, though the pace was slightly slower than in May.

Due to softer business conditions, manufacturers also reduced their input purchasing activity. On the price front, input costs continued to spike and at the steepest rate in four months.

As a result, employment levels also declined, though the pace of job cuts eased from June and was only slight, S&P said.

Looking ahead, the business confidence index dipped for the upcoming 12 months, and was at its lowest since this series began in April 2012, S&P added.