Turkey PMI: Industry growth slows down with Covid restrictions

According to the data announced by the Istanbul Chamber of Industry (ISO) and IHS Markit; Manufacturing PMI declined from 51.4 to 50.8 in December.

The manufacturing PMI index, which was 33.4 due to the economic recession caused by Covid-19 in April, recovered in the following months and had a growth position as of June. Although the second wave of the Covid epidemic and the restrictive effects of increasing interest rates slow the growth of the sector, the index still shows a good image by remaining in a growth position above the 50 threshold value.


If we look at the details of the PMI data; production and new orders slowed. The reason for this was the second phase of the spread of the Covid epidemic and the restrictions introduced again in December. It was observed that firms continued to increase employment in this period, which is positive in terms of continuing the expansion of the sector. The fact that the Covid restrictions were milder than the previous restrictions and the aim of production and supply stages were not affected by this, the employment and production processes were not negatively affected. On the other hand, the slowdown in export markets has a decreasing effect on orders and production. Supply chains are also affected by this situation, so companies have to use a high level of stock. Supply deficiencies also cause price pressures to continue to rise. The reflections of past exchange rate increases, increase in commodity prices and energy costs and supply difficulties underlie inflationary movements throughout the sector.


Although there is a slowdown due to the impact of Covid restrictions and tightening financial conditions, it is observed that the main effects of the epidemic restrictions are in the service sector and manufacturing is better positioned. December corresponds to a period when interest rates increased and quarantine measures came again, so the reflection of this on the market manifested itself as a decrease in demand and a slowdown in order and production as a reflection of this. On the other hand, we can say that in line with the PMI indicators in the world, manufacturing showed a more limited adverse reaction compared to the contraction in the service sector.


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