Turkey: Manufacturing sector remains in tough spot in March
At the close of the first quarter of 2019, Turkey’s manufacturing remained in a tough spot despite an uptick in the Purchasing Managers’ Index (PMI) to 47.2 from 44.6 in February. The index, which is produced by the Istanbul Chamber of Industry in cooperation with IHS Markit, remained firmly entrenched below the neutral 50-point mark that separates expansion from contraction. However, March data suggests that the sector has bottomed out as the contraction was softer than the average over the past year.
March’s uptick was driven by softer drops in output and employment even though demand dynamics remained unfavorable; both new domestic and export orders eased. The moderation in new domestic orders came despite some firms reporting a pick-up in demand conditions; slowing growth in Europe, meanwhile, led to a drop in new export orders. The rate at which businesses shed jobs eased due to “signs of capacity pressures returning” while backlogs of work were cleared at the weakest pace in over a year. In terms of prices, input inflation picked up due to currency weakness and this led to higher output prices.
Commenting on March’s result, Andrew Harker, associate director at IHS Markit stated that “there appears to be light at the end of the tunnel in the Turkish manufacturing sector […] the sector in general looks to be moving towards stabilization.”
Central Bank data, meanwhile, showed that the capacity utilization rate in the sector edged up to 74.3% in March from 74.0% in February on gains in all subsectors. Nonetheless, the overall capacity utilization rate remained depressed compared to the readings observed during late-2017 and early-2018, the stimulus-driven economic boom.