Turkey: Manufacturing activity growth slows down in March
April 2, 2018
Manufacturing conditions remained relatively positive at the end of the first quarter, although the improvement in operating conditions was much weaker in March compared with the previous month. The manufacturing Purchasing Managers’ Index (PMI), produced by the Istanbul Chamber of Industry (ICI) and IHS Markit, eased markedly to 51.8 in March from 55.6 in February, an 11-month low. Despite the sizeable drop, the index still lies above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has now been for just over a year.
The moderation in the headline figure reflected softer growth in manufacturing output, which nonetheless held in positive territory on the back of greater volumes of new orders. Survey respondents noted higher product diversification and stronger client demand as the main conductors of a further increase in new orders. In turn, manufacturers hired additional employees in March in order to cope with rising output levels. That said, employment growth decelerated markedly from February and was marginal overall. Despite increased capacity, firms also intensified their purchasing activities, causing the stocks of pre-production goods to remain mostly unchanged. On prices, input costs continued to rise markedly in March on a weak lira, while firms largely passed these costs onto consumers.
Against a backdrop of only moderate increases in output and employment, the manufacturing capacity utilization rate was unchanged in March at February’s 77.8%. The indicator hit a near decade-high of 79.9% in November, and has trended downwards ever since.
Author: David Ampudia, Economist