Turkey’s Purchasing Managers’ Index (PMI) for manufacturing in October rose for the first time since July, with the reading of 44.3 beating September’s 42.7, the lowest point seen since March 2009’s 37, IHS Markit said on November 1. Any reading below 50 denotes contraction.
“The continued weakness of Turkey’s PMI provides further evidence that the economy has fallen into a deep recession,” Liam Carson of Capital Economics said in a research note, adding that despite the 1.6-point gain the October reading was still the second worst recorded since 2009 and a further slump in industrial production remained on the cards.
“After growing by 1.7% y/y in August, industrial production is set to contract by around 5% y/y over the coming months. The hard activity data have so far held up better than had been suggested by the surveys and it’s possible that the fall in industrial output won’t be quite as sharp as the PMI indicates. That said, October’s reading chimes with other survey indicators which point to a severe economic downturn,” Carson added.
Crumb of comfort
The breakdown of the Turkish manufacturing PMI (full name, the Istanbul Chamber of Industry Turkey Manufacturing PMI) did, however, provide a crumb for comfort. The “output prices” component of the index fell from a record high of 77.7 in September to 61.3 in October. This supported Capital Economics’ view that the worst of the major rise in inflation is now behind Turkey and that policymakers at the central bank will refrain from tightening monetary policy further.
Turkey’s manufacturing PMI figure was posted in expansion territory—at more than 50—for 13 months in a row from March last year to March this year. The first of the run of negative results came in April. The October data indicates that the Turkish economy has contracted for seven months in a row.
“Latest PMI data suggest that the worst of the current difficulties may have been seen in September, with key indicators such as output, new orders and employment all moderating at weaker rates in October amid a slowdown in inflation. That said, market conditions remained challenging for firms and further improvements will be needed in coming months if we are to see a return to growth,” Andrew Harker, associate director at IHS Markit, said.
Difficulties in Turkish manufacturing’s supply chains were signalled in October, with vendor delivery times lengthening to the greatest extent since the survey began in June 2005, IHS Markit also noted.