Clear sign of recession as Turkish manufacturing slumps – Reuters

Turkey is facing “clear signs” that it is entering a recession after a survey published on Monday revealed that manufacturing activities had dropped to the lowest levels in nine years, Reuters has reported.

A survey conducted by the Istanbul Chamber of Industry and business intelligence firm IHS Markit showed the Purchasing Managers’ Index (PMI), “a closely watched measure of manufacturing health”, had fallen to its lowest since March 2009, said the report.

“The decline was driven by a slowdown in output and new orders, the survey showed, which in turn caused scaling back in employment and purchasing activity,” Reuters said.

“The sharp drop in Turkey’s PMI last month chimes with other very weak survey data and adds to the evidence that the economy has entered a deep recession,” Liam Carson of Capital Economics was quoted as saying in a note to clients.

October’s PMI figures revealed a continuation in a trend that has seen manufacturing figures drop for the past half year, amid general concerns about Turkey’s economic situation.

The Turkish lira has been severely weakened by the perception that Turkish President Recep Tayyip Erdoğan intends to take full control of his country’s economy under a new executive presidential system of government that since its inauguration in July has granted him vastly increased powers.

The lira began a swift slide downward in May, after Erdoğan said during an interview with Bloomberg that he would increase his control of the economy and explained his unorthodox views on interest rates being the cause of inflation.

A diplomatic feud with the United States over American citizens imprisoned in Turkey has further added to the country’s woes. U.S. President Donald Trump announced sanctions on two Turkish ministers involved with the arrest and trial of Andrew Brunson, a U.S. pastor held by Turkey for alleged terror links, and later doubled tariffs on steel and aluminium imports from Turkey.

The currency has fallen almost 40 per cent this year, though a 625-basis point rates hike by the central bank has helped halt the slide.

Inflation hit a 15-year high of 18 per cent last month and is expected to surge to 20 per cent by the year’s end, said Reuters.

All of this has been reflected in energy prices, which Turkey’s regulator have raised by 9 per cent for residences and 18.6 per cent for industry from Oct. 1.

Retail prices, meanwhile, are 19 per cent more expensive than they were in September 2017, said Reuters.

A rare piece of good news from Turkey came in export figures, which the Turkish Ministry of Trade reported had jumped 22.6 percent year-on-year in September to $14.5 billion, shrinking the trade deficit by over 75 per cent.