Manufacturing Stabilises In July Despite Further Drop In Exports

- Latest purchasing managers index (PMI) survey data from Markit signalled a broad stabilisation of Turkish manufacturing business conditions at the start of the third quarter, despite drop in exports orders, according to the Markit data released on Monday.

The PMI recovered to 50.1 in July, from 49.0 in June, signalling a broad stabilisation in business conditions at Turkish manufacturers at the start of the third quarter. This marked only the second time in 2015 so far the PMI has not signalled contraction
of the sector, although it remained below its longrun trend level of 50.9.

"The rise in the PMI in July was mainly driven by the output and new orders components, and weighed on by stocks of purchases" Markit said in a statement on the data. "Production was broadly unchanged from one month previously while new orders registered only a fractional decline, mainly reflecting a further drop in new export business."

Employment and purchasing activity both rose slightly but backlogs fell sharply, and firms generally reported weak underlying market conditions linked to ongoing political uncertainty, it said, meanwhile, input prices continued to rise, albeit at a slower pace.

Commenting on the Turkey Manufacturing PMI survey data, Trevor Balchin, senior economist at Markit and author of the report, said, “The Turkish manufacturing sector showed signs of stabilizing in July, but underlying conditions remained weak."

Exports continued to weigh on overall new business volumes, which have declined every month so far this year, while output was merely unchanged in the latest period, he added. "Job creation and purchasing were bright spots, but even here the rates of growth were marginal. More encouragingly, input price inflation slowed sharply to the weakest since February."

The headline Markit Turkey Manufacturing PMI is a composite single-figure indicator of manufacturing performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater
than 50.0 indicates overall improvement of the sector.

Turkish manufacturing output was broadly flat in July compared with one month previously, following a six-month sequence of contraction. Output levels were partly supported by a further sharp drop in backlogs of work, which have fallen every month
since last December.

Weighing on output was a further drop in new orders received, which in turn reflected a fall in new export business. Total new orders declined for the seventh month running, partly linked by firms to ongoing political uncertainty. That said, the rate of contraction in the latest period was the weakest registered over this sequence.

Manufacturers added jobs in July, extending the current period of workforce growth to four months. That said, the rate of expansion was only marginal and well below the trend shown over the past six years.

Purchasing activity by Turkish goods producers rose in July, following June’s decline. The rate of growth was weak, however, and firms’ input inventories fell for the third time in four months. Stocks of finished goods declined at the fastest rate
since September 2013.

Manufacturing input prices continued to rise in July, linked to foreign exchange pressures. The rate of inflation slowed sharply, however, to the weakest since February. Output prices also rose at a slower pace as a result.