September saw the headline Istanbul Chamber of Industry Turkey Manufacturing PMI (Purchasing Managers’ Index) fall a further 8% m/m. That took it to 42.7, the lowest point seen since March 2009’s 37, IHS Markit said on October 1. The decline followed the 5% m/m drop to 46.4 in August.

Commenting on the survey data, Andrew Harker, an associate director, at IHS Markit, said: “There was little respite for Turkish manufacturers in September as business conditions remained challenging to say the least. Strong inflationary pressures were again in evidence, with clients deterred from committing to new orders and the supply chain impacted.”

“[The PMI level provides] further evidence that Turkey is in recession,” Liam Carson of Capital Economics said in a research note.

The data showed that both output and new orders continued to slow, with companies scaling back employment and purchasing activity. The severe devaluation of the Turkish lira (TRY) again contributed to inflationary pressures felt in manufacturing. Difficulties in sourcing materials were reported given the reduced purchasing power of the currency, although the painful economic rebalancing confirmed by data released in recent days is at least helping to drive a modest recovery of the TRY.

IHS Markit reported some suppliers were unable to source materials, leading to delays in the receipt of purchases. Supplier lead times lengthened to the greatest extent since the survey began in June 2005.

On the PMI scale, any figure below 50 denotes contraction. Turkey’s manufacturing PMI figure was posted at more than 50 for 13 months in a row from March last year to March this year. The first of the run of negative results came in April. The September data indicates that the Turkish economy contracted for six months in a row and at an escalating pace.

Very weak survey data
The sharp drop in Turkey’s PMI corresponds to other very weak survey data and adds to the evidence that the economy has entered a deep downturn into negative growth territory, according to Capital’s Carson.

“At face value, the latest PMI data suggest that, after growing by a better-than-expected 5.6% y/y in July, industrial production is set to contract by 7-8% y/y over the coming months,” Carson also said, adding “Admittedly, the relationship between the survey and hard activity data has broken down in recent months and it’s possible that the contraction in industrial output won’t be as sharp as the PMI indicates. But even so, the latest reading chimes with other survey indicators which point to a deep economic downturn.”

The output price sub-component of the Turkish PMI climbed to its highest level in the 13-year history of the series.

Data due on October 3 are likely to show that Turkish annual inflation continued to rise sharply last month, Carson also said. The Capital Economics forecast sees inflation moving up from 17.9% y/y in August to 22.0% y/y in September.

Turkey’s economic confidence index declined by 15.4% m/m to 71 in September, data from national statistics office TUIK showed on September 27. It was the biggest drop seen since November 2008.

Another indicator of the hard landing Turkey may endure came as Turkish carmaker Tofas announced it is to suspend production at its Bursa plant for nine days in October given the contraction in demand seen in its domestic market. The company announced the move on September 26 in a bourse filing.

Packaging materials producer Eminis Ambalaj, meanwhile, on September 25 requested that a court commence a bankruptcy protection procedure.