The headline purchasing managers’ index (PMI) for Turkish manufacturing ticked up to 54.1 in August from 54.0 in July, signalling a solid improvement in the health of the manufacturing sector and one that was the most marked since January, according to survey compiler IHS Markit.
Business conditions have now strengthened in Turkey for three consecutive months, it added, noting that improving customer demand and the recent loosening of COVID-19 restrictions in the country meant that new orders continued to rise firmly during August. New export business increased particularly sharply.
Commenting on the Istanbul Chamber of Industry Turkey Manufacturing PMI survey data, Andrew Harker, economics director at IHS Markit, said: “Despite the numerous challenges being faced by manufacturers at present, Turkish firms were able to sustain growth for a third successive month in August as client demand improved, while purchasing and employment were ramped up.
“Efforts to secure export sales were particularly successful, with international new business up sharply. Manufacturers therefore had to battle with the severe difficulties still afflicting transportation to get their goods out to customers. Firms will be hoping that some of these constraints start to ease over the course of the rest of the year so that their full growth potential can be realised.”
In a note to investors on the PMI data, Liam Peach at Capital Economics said: "[...] the PMI suggests that industrial production will settle at 10-15% y/y in Q3. This would be consistent with an expansion of 3-4% q/q (taking output further above its pre-pandemic trend) and adds to the signs that Turkey’s economy has experienced a rapid rebound from its lockdown in May."
Supply chain disruption
Supply chain disruption continued in August contributing to further rises in input costs and selling prices, IHS Markit noted.
It added that difficulties in making deliveries to customers were reportedly behind an accumulation of stocks of finished goods.
In further remarks on the survey outcome, IHS Markit said: “Production expanded for the third successive month amid improving customer demand, with the aforementioned growth of new export orders helping to boost output in some cases. The rate of expansion was solid, albeit softer than that seen in July. Sharper increases in both purchasing activity and employment were recorded as firms attempted to keep on top of workloads. The rise in employment was the fastest since January.
“Manufacturers were able to prevent a build-up of backlogs of work, which were broadly unchanged for the second month running. Some respondents highlighted the need to expand workforce numbers. Efforts to secure inputs continued to be hampered by supply-chain delays, which contributed to further sharp increases in input costs and output prices. That said, inflationary pressures showed signs of easing during the month.”
Stocks of both purchases and finished goods rose in August, the first expansions in 12 and 69 months in Turkey, respectively, the survey also showed.
Firms increased their pre-production inventories in line with higher new orders, and as part of efforts to guard against supply shortages, IHS Markit added.