Turkey: February manufacturing PMI 50.4

by karakoyclub

According to the data announced by the Istanbul Chamber of Industry (ISO) and IHS Markit; Manufacturing PMI fell to 50.4 from 50.5 in February. While the latest data reveal that the producers have started to have difficulties in the current price and supply conjuncture, although the production is still in the expansion zone, the slowdown continues due to the uncertainty in the markets. The weakness in production, as well as the effect of natural gas and electricity price hikes in the sector, and partial periodic interruptions may indicate a slowdown in activity. The recent global political risk balance, supply chains and input costs factors are observed in production disruptions. PMI has been in growth zone above 50 basis points since June 2020, excluding May 2021 (closing effect).


If we look at the details of the PMI data; power cuts and weak demand conditions were effective in slowing down production. Despite the growth in exports, total new orders lost momentum. Uncertainty in the markets and price increases were effective in this. Uncertainty in the market conjuncture and rising inflationary effects reduce the demand of customers, while exports are in a supportive position as foreign demand has not yet been reflected in foreign geopolitical balances. With the increase in backlogs, firms continued to increase employment to keep up with existing orders. Intense pressure on the inflation side is one of the most compelling factors in the sector. Input costs continued to rise, driven by increases in raw material, energy and transportation prices and wages. While the production costs of the companies increased, the effects of the depreciation of the TRY also caused a significant increase in sales prices and production costs.


In terms of growth; The continuation of the production increase in the current PMI data, the activity remaining in the strong region, the reaching pre-pandemic levels in the capacity utilization in the last months and the effect of carried over orders from the previous period are positive details. On the other hand, when we look at the factors that may affect the growth momentum in the world, there is an accumulation of downside risks for the future. The decrease in input supply due to the supply chain network is reflected in the European and global PMIs as a slowdown. In addition, the reflections of the Russia-Ukraine war, especially as an important externality of foreign demand, show that there will be negative effects on exports and global economic activity in the coming period. In an environment where international orders are negatively affected by the current conjuncture, we think that the contribution of exports to growth will decrease. In addition to the negative factors coming from foreign demand, we expect tourism to be affected by the current geopolitical crisis environment and bring negative effects on the current account balance and growth equation.

Kaynak Tera Yatırım-Enver Erkan
Hibya Haber Ajansı

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