Turkey’s manufacturing sector returned to growth during June following the loosening of restrictions brought in to address a spring resurgence of the country’s COVID-19 outbreak, according to the latest purchasing managers’ index (PMI) survey data released on July 1.

The headline PMI moved back above the 50.0 no-change mark (any figure greater than 50.0 indicates an overall improvement of the sector), posting 51.3 following a reading of 49.3 in May, according to survey compilers Istanbul Chamber of Industry and IHS Markit.

Andrew Harker, economics director at IHS Markit, said: “With COVID-19 cases having fallen sharply and restrictions easing, Turkish manufacturers were able to record a return to growth in June, and will be hoping that the upward trends continue in the months to come.

“There were some suggestions that growth could have been even stronger were it not for the ongoing difficulties in sourcing raw materials, with firms struggling to build input inventories and having to dip into stocks of finished goods to help fulfil new orders.”

“Stronger domestic demand”

Nicholas Farr at Capital Economics, in a note to investors addressing the latest PMI data on Turkey, the Czech Republic and Poland, said output and new orders were up in all three countries, adding: “The PMI breakdown suggests that the easing of COVID-19 restrictions in recent months is feeding through into stronger domestic demand conditions for manufacturers.”

Farr also observed that the input price component in Turkish manufacturing rose notably in Turkey, with the rise in costs resulting in higher output prices. IHS Markit said that the input price component and the output prices gained at the fastest pace since September 2018.

The rate of job creation in Turkey’s manufacturing quickened in June, with employment up for the 13th successive month, and at a modest pace that was faster than that seen in May, added IHS Markit.

The sector’s new business from abroad also expanded, at the fastest pace since January, while there “were some reports from firms that difficulties securing raw materials had prevented a sharper increase in production”, it said.

IHS Markit further commented: “Challenges sourcing materials also meant that stocks of purchases continued to fall, despite a return to growth of input buying. Stocks of finished goods also decreased as manufacturers used inventories to help fulfil new orders amid difficulties finding materials… Panellists often linked higher input prices to currency weakness, while there were also reports of higher costs for raw materials such as metals.”