ICI Turkish Manufacturing PMI September 2020 Report and Turkish Sectoral PMI Report Were Announced

• 01.10.2020
• News

Istanbul Chamber of Industry Türkiye Manufacturing PMI (Purchasing Managers Index), the fastest and most reliable reference for the manufacturing industry’s performance that is the leading indicator of economic growth recessed to 52,8 in September but pointed out to a significant recovery in the operation conditions. Therefore, the operation conditions continued to strengthen during the last four months. In line with the increasing orders, the firms realized the highest level of employment since February 2018.

According to the September data of Istanbul Chamber of Industry Türkiye Sectoral PMI, recovery in the operation conditions continued to recover in most of the 10 sectors; however, weakness maintained its existence in several fields. Basic metal and chemical, plastic and rubber sectors were the leading sectors in the growth; however, operation conditions in sectors such as food products and clothing and leather products slowed down. While the production increased in eight of 10 sectors, the fastest production increase was experienced in the chemical, plastic and rubber category. The sectors of which production decreased is the clothing and leather products.

The September 2020 results of Istanbul Chamber of Industry Türkiye Manufacturing PMI survey (Purchasing Managers Index), the fastest and most reliable reference for the manufacturing industry’s performance that is the leading indicator of economic growth were announced. Based on the survey results where all figures measured over 50,0, the threshold value point out to sectoral improvement, the figure which realized as 54,3 percent in August recessed to 52,8 in September and pointed out to a strong improvement in the operation conditions of the sector compared to the previous month. Therefore, the operation conditions continued to strengthen during the last four months.

The continuation of the process of returning to normal after leaving the worst behind in the Covid-19 pandemic resulted in the recovery of demand in September as well. As the result, the growth in the production and new orders continued its existence. It increased for fourth month in two sub-indexes subsequently. On the other hand, the growth lost speed in August.

In line with the increasing orders, the firms realized the highest level of employment since February 2018. In addition to the expansion in the capacity, the increase lost speed and enabled firms to decrease their accumulated works. However, weakness in Turkish lira caused inflationary pressures increase in September. Input costs inflation increased in the past two months and reached the highest level since October 2018. Similarly, final product prices recorded the highest speed of the last two years. Notifications of the firms stating that the increase in rate of exchange supported the competition capacity in the export markets took place among the relatively positive findings of the survey. Additionally, purchasing activities increased during the last four months by reflecting the increase in new orders and production requirements. Also, continuation of the wary attitudes of firms in terms of destocking and using the inputs in order to support the growth in the production resulted in decrease in the input stocks.

Andrew Harker, Economy Director of IHS Markit who evaluated the Istanbul Chamber of Industry Turkish Manufacturing PMI Data expressed that:

The most attention-grabbing development in the latest PMI survey is the build-up in the employment creation speed. As the reflection of the recovery process experienced in the demand following the Covid-19 driven shrinkage, manufacturers are seen to be willing for the investments to make the employment grow again. On the other hand, increase in the production and new orders lost speed and pandemic threat maintained its existence. Firms will be hoping for the trends to remain positive in the last quarter of the year so that the recovery can continue.

Operation conditions continued to improve in most the of the sectors

According to the September data of Istanbul Chamber of Industry Türkiye Sectoral PMI, recovery in the operation conditions continued to recover in most of the 10 sectors followed within the scope of the survey; however, weakness maintained its existence in several fields. Basic metal and chemical, plastic and rubber sectors were the leading sectors in the growth; however, operation conditions in sectors such as food products and clothing and leather products which were devoted to the consumers slowed down. The production increased in eight of the 10 sectors and this figure has not changed compared to the August. While the fastest production increase was realized in chemical, plastic and rubber category, sectors of which production speed decreased became the clothing and leather products and food products. Trends in production were in line with the new orders in general.

A record increase has been experienced since January 2016 in the new orders of basic metal sector and it has been followed by chemical, plastic and rubber products with a slight difference. Sectors where the new orders received from abroad were minority in September which maintained the weakness in total new orders.

Also, eight of 10 sectors recorded employment increase at the end of the third quarter. While the number of employees working in the wood and paper products was generally horizontal line, the only sector where the employment decreased was the food products sector. The increase in the operational capacity enabled firms to work on accumulated works.

As the reflection of the weakness in Turkish liras mostly, input costs continued to increase sharply in all sectors and inflation accelerated in the great majority of the sectors compared to August. Inflation of final product prices increased in most of the sectors.