A strong performance by Turkish manufacturers in February has given Turkey its best purchasing managers’ index (PMI) reading in two years.

The headline PMI posted above the 50.0 no-change mark for the second time in as many months during February, rising to 52.4 from 51.3 in January, data released by the Istanbul Chamber of Industry and IHS Markit showed on March 2.

Eliot Kerr, economist at IHS Markit, said: “Turkish manufacturers enjoyed a fruitful month in February, as a surge in demand led to accelerated production growth and the quickest improvement in business conditions for two years. The increase in output required faster hiring and resulted in a solid rise in staff numbers. These positive results suggest that the sector could be starting a sustained period of growth.”

On the cost front, input prices faced by Turkish manufacturers continued to rise, IHS Markit noted, adding in its Turkey PMI analysis: “In fact, the rate of inflation was the sharpest for eight months. When explaining increased cost burdens, survey respondents often mentioned weakness of the Turkish lira against the US dollar. Finally, firms opted to pass on some of the higher costs to their clients, with an increase in average output prices during February. The latest rise was the quickest since last June and marked overall.”

Solid rises in output, new orders

Firms reported solid rises in both output and new orders in February, underpinned by a marked expansion in new business, as firms cited stronger demand from their clients.

Turkey’s Erdogan administration has thrown open the credit taps in a bid to secure a rapid bounceback from the recession suffered by the country last year. It is targeting 5% growth in 2020. However, many economic experts are concerned that the strategy risks repeating the mistakes made in the run-up to the summer 2018 lira crisis that preceded the recession, with another freefall for the domestic currency possibly round the corner.

IHS Markit added: “In fact, the latest increase in new work was the quickest for two years. Amid improved demand conditions, goods producers increased output in February, with the pace of growth accelerating to the fastest for almost two years. The solid rise extended the current run to four months. Employment grew at the strongest rate since February 2018 in the latest survey period. Panellists commonly attributed the solid rise in staff numbers to increased production requirements.”