IHS Markit has forecast that industrial production in Turkey will only fall by 0.8% this year despite the coronavirus (COVID-19) crisis. It based the prediction on a recovery in the country’s manufacturing sector shown by a key purchasing managers’ index (PMI) reading for October.

Andrew Harker, economics director at IHS Markit, said: “The recovery in the Turkish manufacturing sector remained on track in October, with a further solid increase in production. Moreover, firms continued to ramp up staffing levels to support output, suggesting a confidence that the recovery is sustainable.

“In fact, IHS Markit now expects industrial production to fall just 0.8% over the course 2020 despite the collapse in output earlier in the year due to COVID-19. This positive picture is all in spite of ongoing currency weakness which is causing inflationary pressures to build.”

The October manufacturing PMI survey data for Turkey, compiled by Istanbul Chamber of Industry and IHS Markit, indicated that the Turkish manufacturing sector continued to grow strongly at the start of the final quarter of the year. The headline PMI rose to 53.9 in October from 52.8 in September, marking the fifth gain in as many months following the downturn caused by the coronavirus pandemic. Any figure greater than 50.0 indicates overall improvement in the sector.

Turkish output growth ticked higher, with production supported by the fastest rise in employment since February 2018.

Inflationary pressures

The recent trend of building inflationary pressures continued in October, with both input costs and output prices rising at sharper rates amid currency weakness, IHS Markit said.

It added: “Manufacturers indicated that customer demand continued to recover, with new orders rising for the fifth month running. New export orders also expanded. As a result, firms increased their production volumes again in October, with the rate of growth ticking up from that seen in September.

“Rises in output and the delivery of products to customers meant that backlogs of work were reduced for the third month running. The expansion in production was supported by a further marked increase in staffing levels. In fact, the rate of job creation quickened to the strongest since February 2018.

“Manufacturers also raised their purchasing activity, but stocks of inputs decreased amid the use of items in the production process and difficulties obtaining materials. Supply chain delays were particularly evident when sourcing inputs from abroad.

“Overall, lead times lengthened to the greatest extent since June. Weakness of the Turkish lira again led to sharp rises in both input costs and output prices in October. Input costs increased at the fastest pace for two years, while charges were raised to the greatest extent in 25 months.”