Turkey: Downturn in manufacturing sector intensifies in April
May 2, 2019
Turkey’s manufacturing sector opened the second quarter on a sour note: The Purchasing Managers’ Index (PMI) ticked down to 46.8 in April from 47.2 in March, indicating that operating conditions worsened at a stronger pace. The latest print marked the 13th consecutive moderation in business conditions.
The latest downturn in the index, produced by the Istanbul Chamber of Industry in cooperation with IHS Markit, came on the back of a further drop in new orders, both domestic and foreign, driving production down and leading to more moderate purchasing activity. The drop in domestic new orders was sharper than new business from abroad. Weak new orders also drove destocking activity, with pre- and post-production inventories shrinking at a quicker pace compared to March. Ongoing currency weakness vis-à-vis the greenback was again a noticeable drag on the sector. The weak lira drove input costs to the highest level since October last year and this consequently pushed output prices up to a six-month high. Furthermore, suppliers’ delivery times lengthened again amid payment difficulties, likely linked to demand weakness.
Andrew Harker, associate director at IHS Markit, noted that there was a silver lining in April: “More positive was the labour market situation, with employment broadly stable amid signs that firms are looking to the future and working on new products in anticipation of an improvement in business conditions later in the year.”
The Central Bank’s capacity utilization rate for the sector showed an uptick to 75.0% in April from 74.3% in March on improvements in all subsectors. However, the rate remained noticeably below the readings observed late-2018 and 2018.
Author: Jan Lammersen, Economist