Turkish manufacturing activity declines for eighth month

Turkish manufacturing activity declined for the eighth consecutive month in November though it fell at a slower pace as inflationary pressures eased.

The Purchasing Managers' Index (PMI) for manufacturing was 44.7 compared with 44.3 in October, according to data published by IHS Markit and the Istanbul Chamber of Industry,  A reading below 50 points indicates a decline in activity.

“A marked easing of inflation is helping to alleviate some of the pressure on Turkish manufacturers as the lira exchange rate shows some improvement,” said Andrew Harker, an associate director at IHS Markit. “While the worst of the current slowdown may be over, business conditions remain challenging and there is still some way to go before a return to growth is signalled.”

Turkey’s government has slashed taxes on some goods such as cars, vans and white goods and froze increases in electricity prices until the end of the year to help stir economic activity, which has slumped due to a currency crisis. Ratings agencies such as Moody's and the Organisation for Economic Cooperation and Development (OECD) are predicting negative economic growth next year.

Turkish inflation slowed to 22.6 percent in November from 25.2 percent the previous month, the highest level in 15 years, according to figures published by the Turkish Statistical Institute on Monday. The lira is trading at 5.15 per dollar, stronger than a record low of 7.22 reached in August, but is still weaker by 27 percent this year.

“Gradual improvements in the lira exchange rate led to a sharp slowdown in rates of both input cost and output price inflation in November,” IHS Markit said. “Input prices increased to the least extent since September 2017, while output charges rose only slightly.”

Still, subdued demand conditions led manufacturers to use existing stocks rather than buy new inputs, leading to both a decline in stocks and in goods used for production. Marked slowdowns in employment and new orders continued as market conditions remained challenging, according to the survey.

“Suppliers’ delivery times continued to lengthen in November,” IHS Markit said. “Some panelists indicated that vendors had difficulty in sourcing materials. Meanwhile, there were also reports that some suppliers were requesting cash payments, contributing to delays.”