May PMI shows Turkish manufacturing buffeted again but signposts road to recovery

May PMI shows Turkish manufacturing buffeted again but signposts road to recovery
By bne IntelIiNews June 1, 2020

As fully anticipated, Turkey’s manufacturing sector in May endured another rough month amid the coronavirus (COVID-19) crisis, but the latest monthly purchasing managers’ index (PMI) data, released on June 1, signposted a likely recovery during the summer.

The Istanbul Chamber of Industry Turkey Manufacturing PMI reading was 40.9 in May, up from 33.4 in April, but still short of the 50.0 no-change mark, thereby signalling a further moderation of business conditions.

Andrew Harker, economics director at IHS Markit, which compiles the PMI surveys, said: “The Turkish manufacturing sector continued to be buffeted by the effects of the COVID-19 pandemic in May, according to the latest PMI data, preventing a swift rebound following a sharp slowdown in April. Rates of moderation softened, however, suggesting that the sector is on the road to recovery. As long as the virus continues to be brought under control, therefore, the move back to growth should follow in the months ahead.”

Output and new orders slowed sharply again in Turkish manufacturing in May, albeit to lesser extents than in April, while firms scaled back employment and purchasing, IHS Markit said.

Lira weakness pushes up input costs

On the price front, rates of both input cost and output price inflation accelerated due to Turkish lira weakness, it noted. Moreover, the rate of inflation was the fastest for a year, causing manufacturers to raise their own selling prices. The increase in charges was faster than that seen in April and quicker than the series average.

“Further sharp slowdowns in both output and new orders were recorded in May as the COVID-19 pandemic continued to disrupt business and hamper demand. Rates of moderation eased, however, with some firms reporting that they had resumed operations during the month,” the survey compiler also said.

It added: “Manufacturers scaled back employment for the second month running, albeit at a softer pace and one that was much weaker than those seen for output and new orders as the majority of companies kept staffing levels unchanged.

“A lack of new orders also led firms to moderate their purchasing activity, while also lowering stocks of both purchases and finished goods.”

Difficulties in terms of transportation due to COVID-19 restrictions meant that suppliers’ delivery times lengthened sharply again, with receiving items from abroad reportedly particularly difficult, IHS Markit said.