Turkey: Downturn in manufacturing sector intensifies in May
June 3, 2019
The downturn in the Turkish manufacturing sector intensified in May, with the Istanbul Chamber of Industry and IHS Markit’s Purchasing Manufacturers’ Index (PMI) dropping to 45.3 in May from 46.8 in April. Business conditions have now deteriorated for the 14th consecutive month and April’s print marked a four-month low.
In May, the headline figure dropped primarily due to a weakening lira driving up input, and subsequently, output prices. This, in turn, dampened demand dynamics as new orders moderated; anecdotal evidence also pointed to weaker European demand. Consequently, manufacturers scaled back purchasing activity. The weaker lira also led to cash problems and this lengthened suppliers’ delivery times.
Andrew Harker, associate director at IHS Markit, noted that “the slowdown in new orders since the beginning of the year somewhat postponed the expectations of a recovery that arose during the first quarter.”
The Central Bank’s capacity utilization rate for the sector showed an uptick to 76.3% in May from 75.0% in April on improvements across all subsectors. While May’s rate was the highest since August last year, it remained noticeably below the readings observed late-2017 and 2018.
Author: Jan Lammersen, Economist