Turkey: Solid demand reinvigorates growth in the manufacturing sector
January 2, 2018
The manufacturing sector closed the year on a strong note, with operating conditions in the sector at their strongest in four months. The manufacturing Purchasing Managers’ Index (PMI) produced by the Istanbul Chamber of Industry (ICI) and IHS Markit recorded a back-to-back increase to 54.9 in December from 52.9 in November. The PMI now lies further above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has now been for ten consecutive months.
The December report showed stronger demand fueling robust activity in the sector. Domestic new orders remained solid, while new orders from abroad grew at the fastest pace in nearly seven years. Firms’ output growth accelerated to a three-month high, which in turn was supported by healthy employment growth during the month. In fact, firms increased their staffing levels at the quickest rate since March 2011, which allowed companies to remove some capacity pressure and work through existing business. Data from the Central Bank of the Republic of Turkey (CBRT) shows that the manufacturing capacity utilization rate eased from the fresh nine-year high of 79.9% recorded in November to 79.0% in December.
Solid demand also led to more intense purchasing activity among companies, which contributed to a modest increase in input inventories. Regarding prices, an unfavorable exchange rate continued to put pressure on companies’ margins through higher input prices, but they were largely able to pass costs onto consumers.
Author: David Ampudia, Economist