PMI shows how earthquake disaster undercut Turkey’s manufacturing sector

PMI shows how earthquake disaster undercut Turkey’s manufacturing sector
/ Istanbul Chamber of Industry / S&P Global
By bne IntelIiNews March 1, 2023

Impacts of Turkey’s February earthquake disaster undercut the country’s manufacturing sector during the month, meaning the headline reading of the Istanbul Chamber of Industry Türkiye Manufacturing Purchasing Managers’ Index (PMI) was unchanged compared to January at 50.1, S&P Global said on March 1.

Andrew Harker, economics director at S&P Global Market Intelligence, said: "The terrible earthquake[s] in February impacted the Turkish manufacturing sector during the month, with supply chains and production lines affected in particular. Hopefully we will see signs of recovery in the affected areas and across the sector as a whole in the months ahead."

Output was scaled back as some firms paused production due to the earthquakes, while new orders were also affected, said S&P, adding that supply-chain disruption was also evident.

The headline index was held above the 50.0 no-change mark by a marked lengthening of suppliers' delivery times, the index for which is inverted when calculating the overall PMI, it noted.

“In fact,” said S&P, “supplier lead times lengthened to the greatest extent in ten months as the earthquake caused difficulties in the sourcing and delivery of inputs.

“As well as impacting supply chains, the earthquake also caused a moderation in output in the sector as some firms paused production.

Output eased modestly, albeit at the second-slowest pace in a year.”

Paused production lines and difficulties sourcing items amid the disaster led manufacturers to scale back their purchasing activity, with stocks of inputs also lower, the survey compiler said.

“Issues with supply and production meant that some firms turned to existing inventories to help meet order requirements. As a result, stocks of finished goods were depleted to the greatest extent since December 2021,” it also observed.

Rises in raw material costs and wages, plus currency weakness, led to a further marked increase in input prices during February, but the rate of inflation was little-changed from January and broadly in line with the series average, S&P said.

“In turn, output prices also rose sharply, albeit at a pace that was below the average seen across 2022,” it concluded.