“Manufacturing Operating Conditions Downturn Worsening In Sept.”

- Istanbul Chamber of Industry Turkey PMI™ Manufacturing Index survey signaled a worsening downturn in Turkish manufacturing operating conditions that has started the previous month, in Sept. The PMI survey pointed to an escalating fall in reorders despite the increase in exports, while inflation pressure continued to gain strength.

According to latest PMI survey data from Istanbul Chamber of Industry and Markit, showed that conditions in the sector have weakened all months despite May and July this year, and dropped under 50 level. Meanwhile, headline PMI fell to 48.8 from 49.3 level in August, to the lowest level of the last five months.

Commenting on the survey data, Senior Economist at Markit Trevor Balchin said, “Turkey’s manufacturing sector remained in a downturn in September” and added that new orders and output were both falling at faster rates and firms were cutting back on purchases.

“On the other hand, the PMI average for the third quarter as a whole was slightly higher than in both the first and second quarters of the year. The latest survey again highlighted growing inflationary pressures linked to the weak lira, but on the flipside the currency was reported to have boosted exports during the month.”

According to PMI data, production fell at the strongest rate since April as new orders declined for the ninth month running. On the contrary, while export orders strengthened, manufacturing employment rose in September, having declined slightly in August.

New orders index declined from 49.6 to 48.6, two sub-indexes declined under the 50 level that has been pointing to a shrink in the last nine months.

According to comments of companies within survey, weak market conditions and economic and political uncertainty caused the shrink in production and new orders. Additionally, the weak currency marks a main factor driving inflationary pressures during the month.

Against the shrink in new orders, exports orders continued to grow in Sept. The sub-index of export orders having seen 50.4 in August rose to the 51.6 level. Although the index fell under the average of its history, the index saw the highest level since April, which was explained by firms with the new customers and the depreciation in exchange rate in lira.

Manufactured good stocks saw an increase in parallel with the decline of demands in Sept, following a shrink for two-months.

Ex-factory costs that have reached a plateau last month recorded the fastest increase since Feb. 2014, while output price inflation hit a 19-month high. Firms linked the increase in prices to the exchange rate, and employment recorded an increase under the long-term average level.

The Manufacturing PMI is weighted based on new orders output, employment, suppliers’ delivery times, stock of ıtems purchased, with the delivery times ındex inverted.

(Graphic)