Turkish PMI rises to eight-month high in October but still below growth levels

By bne IntelliNews November 1, 2016

Turkish PMI rose to 49.8 points in October from 48.3 a month earlier, signalling a near-stabilisation of business conditions in the key manufacturing sector, a survey compiled by Markit and the Istanbul Chamber of Industry showed on November 1.

Though at an eight-month high, the October reading keeps the figure below the 50-point threshold marking expansion. The improvement offers hope Turkey's industrial production will continue growth in the months to come. Turkey’s calendar adjusted industrial output increased by 2.2% y/y in August, rebounding from July's slump of 4.9% y/y.

“The survey also provided early signs that the Turkish economy is coming out of the slump triggered by July’s military coup attempt,” analysts at Capital Economics suggest in a note. The increase in the PMI index is consistent with industrial production growth of around 3%-4% y/y in the months ahead, up from around zero in Q3, the analysts add.

The increase in October came as new export orders rose for the second time in three months and purchasing activity was strongest in nearly two years. Having improved in August and September, manufacturing employment continued to increase in October, Markit noted. According to the latest official data, Turkey’s unemployment rate hit a five-month high in July, reflecting the effects of a slowing economy and troubles in the tourism industry. The number of employed in the industry sector fell by 76,000 from June.

“The weak lira exerted upward pressure on manufacturing input prices in October, with the rate of inflation reaching a 12-month high. Output prices rose at the fastest rate in five months as a result,” Markit said.

Renewed talks of holding a referendum to give the president more powers, an expected rate hike by the US Fed by the end of the year, and the conflicts in Iraq and Syria are keeping the Turkish lira under pressure. TUIK will release inflation figure for October on November 3. Consumer prices likely increased by 1.32% m/m in October, a recent survey by the central bank showed. Last week, the central bank kept this year's inflation outlook unchanged at 7.5%, but raised its forecast for 2017 to 6.5% from a previous 6%, citing rising import prices.

Calendar-adjusted Industrial Production Growth by main Industrial Groups (y/y, %)    
  July August
Total Industry -4.9 2.2
Intermediate Goods -5.5 0.9
Durable Consumer Goods -16.6 1.0
Non-durable Consumer Goods -5.2 5.8
Energy 1.8 3.7
Capital Goods -6.5 -1.3
Source: TUIK

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