PMI: The momentum of recovery slows down in August

According to the data announced by the Istanbul Chamber of Industry (ISO) and IHS Markit; Manufacturing PMI declined from 56.9 to 54.3 in August.

According to the data announced by the Istanbul Chamber of Industry (ISO) and IHS Markit; Manufacturing PMI declined from 56.9 to 54.3 in August. The manufacturing PMI index, which was 33.4 in April due to the economic recession caused by Covid-19, recovered in the following months and had a growth position as of June. The index, which increased with controlled openings and increased activity within the economic normalization period, shows that there was a loss of momentum in recovery in August.

 

Economic recovery continues, albeit at a slower pace. During April and May, the measures within the scope of Covid-19 and the closing effect or low-capacity operation were the main factors of the contraction. The significant increase in new orders continued growth in production. Employment increased for the third month in a row, and inflationary pressures increased. While increasing demand during this period was effective in the increase in new orders and production, it seems that this situation also contributed to the employment increase of companies. Continued economic recovery and improvement in external demand conditions may positively affect export and production trends in the upcoming period. On the other hand, the depreciation of TRY will increase the cost of foreign exchange-based intermediate goods as well as adding the current increase in final goods prices more. The price effect and tightening in financial conditions may limit the recovery in demand for the 3Q20 and beyond.

 

After the annual economic contraction of 9.9% in the 2Q20 period; Leading data such as PMI, industrial production, real sector confidence index, capacity utilization, and sectoral confidence indices point to a rapid recovery in 3Q20. However; The pace of recovery may lose momentum towards the end of the quarter due to factors such as the cost effect caused by the depreciation of TRY, the damping of the cumulative demand effect, and the tightening of financial conditions due to tightening policies. Data for August show that we are still in a strong growth zone, but the pace of recovery has also slowed down. During the rest of the year, pandemic conditions and the sustainability of the economic recovery will be the main determinants.

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