Turkish manufacturing sector down for fourth consecutive month

“Output, new orders and new export business all fell for the fourth successive month, with the latter posting a faster rate of decline. Manufacturers’ input stocks declined as purchasing fell, but inventories of finished goods built up,” read a statement by HSBC Turkey Manufacturing PMI, released on May 4.

The PMI remained below the no-change mark for the fourth successive month in April, indicating an ongoing downturn in the Turkish goods-producing sector. The PMI rose from March’s 71-month low of 48.0 to 48.5, but the latest figure was still the joint-second lowest since April 2009. Three of the PMI’s five components weighed on the headline figure during the month, the exceptions being employment and suppliers’ delivery times.

Turkish manufacturers reported a fourth consecutive monthly drop in new orders received in April. The rate of contraction eased slightly since March, but remained solid. New export contracts fell at the fastest rate in six years, despite the weakening lira-dollar exchange rate.

“The latest PMI data signal an entrenched downturn in the Turkish manufacturing sector with output, new orders and exports all falling for the fourth consecutive month. The latter showed the steepest drop in six years, despite the weak lira-dollar exchange rate,” said Trevor Balchin, Senior Economist at Markit.

“Turkish goods producers face the unenviable combination of falling demand and rising inflation, with average input prices increasing at the fastest rate since March 2014. The weak currency was again widely blamed for the latest build-up of inflationary pressure,” he said.

“The strong U.S. dollar was again cited as the main factor driving up average input prices, which increased at the fastest rate since March 2014,” read the statement. “In contrast, manufacturing output prices rose at a weaker rate as firms reported competitive pressures. On a more positive note, employment growth resumed, albeit at a modest pace.”

In line with the trend had shown for new work, production declined for the fourth month running in April, while the rate of contraction was unchanged from March’s near-six-year record. “Survey data also signaled a lack of pressure on operating capacity, as backlogs of work declined for the 13th time in 14 months,” read the statement.

Stocks of purchases held by Turkish manufacturers declined in April, reflecting a drop in input volumes. Conversely, stocks of finished goods rose for the third month running, the longest sequence of growth in more than three-and-a-half years.

The headline HSBC 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.