The Istanbul Chamber of Industry Turkey Manufacturing Purchasing Managers’ Index (PMI) fell below the 50.0 no-change mark for the first time in a year in May as the country’s latest coronavirus lockdown took a toll. The PMI entered contraction territory, registering 49.3 compared to April’s 50.4.
Andrew Harker, economics director at IHS Markit, which publishes the PMI, said: “It is of little surprise that the COVID-19 lockdown restrictions that were in place for much of May had a detrimental effect on the Turkish manufacturing sector over the course of the month. Firms will be hoping that the lockdown had the desired effect in bringing infections under control, and that a swift return to growth will be seen now that measures have started to ease.
“Less transitory seem to be the problems in supply chains, which remained widespread in May and contributed to strong inflationary pressures.”
Impact "should reverse"
Liam Peach, at Capital Economics, said the PMI reading was consistent with Turkey’s industrial production growth slowing to 5.0% y/y in Q2. “The fall in the PMI is likely to reflect the impact of the 3-week lockdown which should reverse now that restrictions have been lifted. But tight monetary conditions and a slowdown in domestic demand are headwinds that are likely to weigh on industry,” he added.
IHS Markit observed that “the moderation in business conditions signalled by the PMI was only marginal.”
In a press release, IHS Markit added: “The COVID-19 lockdown, and associated softening of client demand, led to moderations in both output and new orders during May. Although more marked than in April, the respective rates of easing were much less pronounced than during the first wave of the pandemic last year. New export orders also slowed, ending a four-month sequence of growth.”
Manufacturers continued to raise their workforce numbers midway through the second quarter, but hiring was also impacted by COVID-19 restrictions, IHS Markit said, adding: “As a result, the rate of job creation eased to the weakest in the current 12-month sequence of rising employment.”
The survey confirmed that supply-chain disruption in Turkish manufacturing remained a problem as “highlighted by a marked lengthening of vendor delivery times”.
IHS Markit concluded: “Difficulties securing raw materials often led to increases in their prices. Input costs rose sharply again in May, and at a slightly faster pace than in the previous month. Currency weakness was also reportedly a factor behind higher input costs. In turn, firms raised their own selling prices, and at a steep pace that was the strongest in the year-to-date.
“Purchasing activity was scaled back marginally, and stocks of purchases also moderated, in part due to difficulties securing materials.”