Turkey’s December manufacturing PMI retreats as virus second wave hits orders and supply chains

Turkey’s December manufacturing PMI retreats as virus second wave hits orders and supply chains
Source: IHS Markit & Istanbul Chamber of Industry.
By bne IntelIiNews January 4, 2021

The impact of the second wave of the coronavirus (COVID-19) pandemic caused Turkey’s December manufacturing purchasing managers’ index (PMI) to retreat to 50.8 in December from 51.4 in November, survey compilers Istanbul Chamber of Industry and IHS Markit said on January 4.

Andrew Harker, economics director at IHS Markit, said: “The Turkish manufacturing sector ended 2020 facing twin headwinds. First, the COVID-19 pandemic which has blighted so much of the year led output and new orders to soften. Second, severe supply-chain disruption hampered the ability of firms to secure the materials they need and added to already sharply rising cost burdens.

“Despite these challenges, firms were keen to expand capacity, taking on extra staff and purchasing more inputs. This suggests that manufacturers will be ready as and when the aforementioned constraints on operations ease.”

Although the reading of 50.8 in continues to signal an improvement in business conditions—anything below 50.0 is seen as a deterioration—it pointed to the least marked strengthening of the health of the manufacturing sector in seven months. The coronavirus second wave and restrictions brought in to stem its spread led to slowdowns in manufacturing output and new orders at the end of 2020. Both indicators softened to greater extents than in November, but to much lesser degrees than during the first wave of the pandemic.

Difficulties securing raw materials

Meanwhile, noted IHS Markit, Turkish manufacturers experienced difficulties securing raw materials, with suppliers’ delivery times lengthening to the second-largest degree on record. This was a factor in input costs rising at the fastest pace since September 2018.

IHS Markit also observed that growth of input buying followed a moderation in the previous month, but while purchasing activity rose, difficulties obtaining raw materials meant that stocks of purchases continued to fall.

It added: “These supply issues were highlighted by delivery times lengthening to the second-strongest degree since the survey began in June 2005, second only to the record at the height of the pandemic in April.

“Supply shortages, combined with currency weakness, led to a sharp and accelerated increase in input costs. The rate of inflation was the fastest since September 2018. In turn, output prices also rose sharply, albeit at a slightly slower pace than in November.”