Turkey: Manufacturing PMI improves but remains in negative territory in July
The Purchasing Managers’ Index (PMI), produced by the Istanbul Chamber of Industry (ICI) and IHS Markit, rose slightly from 46.8 in June to 49.0 in July. Despite the uptick, the index remained below the crucial 50-point threshold that separates expansion from contraction in the manufacturing sector for the fourth consecutive month.
The uptick in the index came on the back of greater export orders and employment, with exports likely supported by the weaker lira boosting price competitiveness. In contrast, new orders and production continued to shrink on soft domestic demand, albeit at reduced rates. On the back of the depreciation of the currency, raw material prices increased and both input and output price inflation reached 12-year highs. Price pressures are only likely to intensify further in the coming months, putting further strain on businesses.
Central Bank figures showed that the manufacturing sector’s capacity utilization rate fell slightly from 78.3% in June to 77.1% in July, an over one-year low. Firms’ capacity utilization has dipped notably since the start of the year, in line with the softer manufacturing sector and more adverse economic conditions.