Turkey’s manufacturing purchasing managers’ index (PMI) fell to 50.4 in April from 52.6 in March as the renewed wave of coronavirus infectons hitting the country took an unmistakable toll.
Andrew Harker, economics director at PMI IHS Markit, which releases the PMI with Istanbul Chamber of Industry, said: “The impact of the current wave of COVID-19 infections on the Turkish manufacturing sector in April was clear. Output and new orders softened as customers held off on committing to projects.
“There were some positive signs, however, as both new export orders and employment continued to rise.
“Performance in the months to come will likely depend on how quickly infections come down, helping the sector to operate in a more normal environment.”
Nicholas Farr at Capital Economics responded to the PMI decline by noting higher interest rates in Turkey have also squeezed the economy. He said: “This is consistent with industrial production growth easing from around 10% y/y in Q1 to 5% y/y at the start of Q2. The fall in the PMI was driven by a decline in the new orders and output components, suggesting that recent monetary tightening and tougher virus restrictions are weighing on domestic demand.”
On the PMI scale, any figure over 50.0 signals an improvement in overall business conditions.
The reading of 50.4 meant the health of Turkey’s manufacturing sector strengthened to the least extent in what has been an 11-month sequence of growth.
Softening in new orders
IHS Markit said: “The slowdown in output ended a three-month sequence of growth, but was still much weaker than seen during the early part of the pandemic in April and May last year. The softening of total new orders was recorded in spite of a rise in new business from abroad, which increased for the fourth month running amid signs of improving demand internationally. “Manufacturers continued to expand their staffing levels in April, thereby extending the current sequence of job creation to 11 months. The latest rise was the softest in this sequence, however.”
Inflationary pressures in Turkish manufacturing remained elevated at the start of the second quarter, IHS Markit also said, adding: “Input costs rose sharply, with firms reporting exchange rate weakness and higher raw material prices, in some cases linked to supply shortages. Issues with supply were highlighted by a further substantial lengthening of vendor delivery times amid difficulties sourcing materials and worldwide shipping problems.
“The rate of deterioration was unchanged from March. Rising input costs were often passed through to customers by way of increased selling prices. Charges increased sharply, and at a much faster pace than the series average.”