Manufacturing PMI rises slightly to 47.4 in August

LONDON

The headline Purchasing Managers’ Index (PMI) ticked up in August, posting 47.4 from 46.9 in July, according to a survey conducted jointly by the Istanbul Chamber of Industry (ISO) and S&P Global.

The latest PMI survey data pointed to an ongoing moderation in the Turkish manufacturing sector, with demand slowing sharply, S&P Global said.

Any figure greater than 50 indicates overall improvement in the sector.

There was a weaker softening of output, however, and employment continued to rise, it noted, adding that rates of both input cost and output price inflation eased further, and were the weakest in 31 and 18 months respectively.

“In line with the headline figure, manufacturing output moderated to a lesser degree midway through the third quarter of the year. That said, production still slowed solidly amid challenging market conditions and high prices.”

New orders meanwhile slowed at a sharper pace in August, with the rate of moderation the fastest since May 2020. Panelists reported a lack of demand, price rises and weakness in the global economy.

New export orders also eased, with some reports highlighting a lack of demand from Europe, according to S&P Global.

“On a more positive note, employment continued to increase, with the rate of job creation picking up to a three-month high,” it said.

Although price pressures continued to impact customer demand and production volumes, there were further signs of inflation softening midway through the third quarter.

Higher costs for raw materials, transportation and energy, a rise in the minimum wage and currency weakness, all contributed to increases in both input costs and selling prices, but rates of inflation eased to 31- and 18-month lows, respectively.

Market conditions are clearly challenging at present, with weakness in both domestic and export markets, commented Andrew Harker, economics director at S&P Global Market Intelligence.

“One area of respite for firms is that their cost pressures continued to fade in August. The slowest rise in input prices in over two-and-a-half years fed through to a softer rise in charges. Less pronounced price rises may help to limit the slowdowns in demand over the months ahead,” he said.

The Turkish economy grew by 7.6 percent year-on-year in the second quarter of 2021, after expanding 7.5 percent in the first quarter, the Turkish Statistical Institute (TÜİK) reported on Aug. 31.

The key manufacturing sector grew by 9.1 percent, which followed an 8 percent annual increase in the sector’s output in January-March.

On a related note, rating agency Moody’s revised its growth forecast upwards for the Turkish economy for 2022 from a previous 3.5 percent to 4.5 percent in its latest edition of the Global Macro Outlook 2022-2023 report.

It expects growth to slow to 2.3 percent in 2023.

“We expect inflation, which stood at 80 percent for the 12 months ended July, to fall back close to 70 percent by the end of this year and 40 percent by year-end 2023. We attribute this largely to a decline in oil prices and base