Istanbul Chamber of Industry - Turkish Manufacturing PMI March 2020 Report and Istanbul Chamber of Industry - Turkish Sectoral PMI Survey Were Announced
Istanbul Chamber of Industry Turkish Manufacturing PMI (Purchasing Managers’ Index), the leading indicator of economic growth and the fastest and most reliable referance in manufacturing industry receded to 48,1 in March and was recorded under 50,0, the threshold value in the last three months for the first time. It was stated that the challenges in the industry were mostly caused by COVID-19 pandemic. The pandemic caused production and new purchase orders lose speed.
According to the industrial PMI data which Istanbul Chamber of Industry started to announce on 1 April 2020 for the first time, activity conditions in the great majority of the sectors showed a slowdown in March because of COVID-19. While non-metallic mineral products ranked as the first in the slowdown, only two industries which are food products and water crafts and land vehicles recorded an improvement. Number of employees in seven of the ten industries followed up increased. The fastest employment increase was experienced in chemistry, plastic and rubbery industries.
March 2020 results of Istanbul Chamber of Industry Turkish Manufacturing PMI (Purchasing Managers Index), the fastest and most reliable reference in manufacturing industry performance, the leading indicator of economic growth were announced.
According to the survey results where all figures measured above 50,0, the threshold value point out to improvement in the industry, PMI which had been recorded as 52,4 in February receded to 48,1 in March and the threshold value stayed under 50,0 in the last three months for the first time. It was stated that the challenges experienced in the industry mostly caused by global coronavirus (COVID-19) pandemic. The pandemic caused production and new purchase orders lose speed. While production lost speed for the first time in the last five months, new purchase orders decreased following two-month-expansion period. New export orders lost considerable speed as a reflection of the global scale of the pandemic. Recession in new export orders realized in a higher level compared to the total new purchase orders. Despite of the slowdown in the workloads, Turkish manufacturers continued to employ additional personnel in March. Employment increased for the third month in a row. Several firms stated that the increase in employment caused by the improvement which had been experienced in new purchase orders in the previous months.
The pandemic broke out in a period when Turkish manufacturing gained a strong growth speed. On the other hand, firms reduced their purchasing activities for the first time since October of the last year. Firms were observed to be unwilling to keep stocks because of the existing ambiguity. Accordingly, a decrease was experienced in both final product stocks and input stocks. Delivery of the purchased products was significantly impacted because of COVID-19 pandemic and the second most obvious deterioration was experienced in the delivery durations of the suppliers since June 2005 when the survey had launched firstly. Input cost inflation maintained its high level in March, as well. The primary reason behind the increase in input prices was recorded to be the value loss in the currency. Various decreases in supply had a role in increase in cost loads. As the result of the obvious increase in input costs, manufacturers increased the final product prices. Accordingly, the increase in final product prices realized in the highest level of a period for nearly one and half years.
Andrew Harker, IHS Markit Economy Director stated that:
“COVID-19 pandemic broke out in a period when Turkish manufacturing industry gained a strong growth speed and therefore it created a great shock for the firms. While production and new purchase orders recorded considerable slowdown, global scale of the pandemic impacted export and supply chains in a negative direction. The positive development in the survey is that employment continued to increase, which was estimated to be caused by the hopes of the firms that such setbacks would last be experienced in a short term.
Majority of the industries experienced slowdown
According to the PMI data which Istanbul Chamber of Industry started to announce on 1 April 2020 for the first time, COVID-19 pandemic caused to experience setbacks in Turkish manufacturing industries in March and caused a record-breaking slowdown in activity conditions of majority of the industries. This situation created a conflict with February when most of the industries were in the growth zone. Only two industries as food products and land vehicles and water crafts were recorded improvement in their sectoral activity conditions. Because of the increase in food demand brought by the concerns caused by COVID-19, production of food products industry showed the highest increase since January 2016 when data series had launched for the first time.
On the other hand, the production was observed to be lost speed in all industries apart from food products industry. Industries which experienced the speed lost in the strongest way became wood and paper products and non-metallic mineral products. Slowdown in the production was mostly caused by the weakness in new purchase orders generally because of COVID-19 pandemic. Garment and leather products and wood and paper products became the sectors where the most obvious decreases were experienced in the purchase orders. Despite of the decrease in workloads, firms operating in several industries continued to employ in March, as well. For seven of the ten industries followed up, number of employees increased; however, the industry where the increase was experienced in the fastest way became chemistry, plastics and rubbery industry. While purchasing activities increased in food products and electric and electronic products industries, all other industries recorded slowdown. Increase in cost inflation took a place among the foremost developments of March. Because of the increase in exchange rate and raw material deficiencies, all of the ten industries followed up stated that input prices increased in a higher rate. Acceleration in cost inflation generally caused significant increases in final product prices. While the setbacks in supply chains increased, delivery durations of the suppliers in all industries followed up prolonged at the end of the first quarter.
Andrew Harker, IHS Markit Economy Director stated that:
“COVID-19 pandemic caused decrease in demand, deterioration in supply chains and refreshment in inflationary pressures and accordingly caused setbacks in Turkish manufacturing industries in March. The sole manufacturing industry which was not caused damage by the pandemic was food products. Re-increase in input costs inflation was experienced in a challenging period when manufacturers were trying to guarantee their sales. While ambiguity on the future maintains its existence in a high level, experiencing COVID-19 in a global scale points out that the following months might be challenging for majority of the industries even though for not all of them.