ISO announces January results for Turkey Manufacturing PMI

The January results of the ISO Turkey Manufacturing PMI survey have been released. According to the survey results, where all figures measured above the 50.0 threshold indicate an improvement in the sector, the headline PMI, which was 47.4 in December 2023, rose to 49.2 in January 2024, signaling a moderation in the deterioration of operating conditions. Although the headline PMI reached its highest value in the last four months, it remained below the 50.0 threshold for the seventh consecutive month.

Consistent with the easing of the negative trend in operating conditions, the decline in production was measured at its slowest pace in the last six months. According to survey participants, while demand remained fragile in January, it also showed some signs of improvement. The fact that the contraction trend in new orders reached its seventh month was another development confirming the ongoing fragility in demand.

SLOWDOWN IN EXPORT ORDERS

New export orders also slowed down, but this slowdown occurred at a very moderate level. Due to the weakness in new orders, firms also reduced their purchasing activities and stocks. However, employment remained flat in the first month of the new year following the limited increase in December.

Input cost inflation accelerated significantly in January, reaching its highest level since August of last year. While a significant portion of participants pointed to the effects of the minimum wage increase, it was stated that the rise in raw material costs and the depreciation of the lira also contributed to price pressures. As a result, manufacturers increased their own selling prices at a significant pace, and inflation reached its highest level in the last five months. Supplier delivery times, which shortened slightly in December, recorded an extension in January. According to some survey participants, the increase in delivery times was caused by shipment delays resulting from developments in the Red Sea.

The ISO Turkey Sectoral PMI report indicated that inflation accelerated sharply at the beginning of the year due to the impact of the minimum wage hike, as well as the rise in raw material costs and the depreciation of the lira. In January, when demand and production remained under pressure, growth was limited only to the chemical, plastic, and rubber sector. On the employment side, more positive developments stood out, and five out of ten sectors increased their number of employees.

In January, input costs recorded significant increases across the manufacturing industry. Inflation accelerated in all sectors except for non-metallic mineral products. The sharpest price increase was recorded in land and sea vehicles, while the lowest inflation occurred in basic metals. The fastest increase in selling prices in January also occurred in land and sea vehicles, and inflation in this sector reached its highest level in the last five months. The slowest increase was measured in non-metallic mineral products. Final product prices increased faster in all sectors compared to December.

Manufacturers faced a challenging demand environment at the beginning of 2024. While new orders slowed down in all sectors except for chemical, plastic, and rubber products, the sector that experienced the sharpest decline was clothing and leather products. A more positive picture emerged on the external demand side. New export orders increased in four sectors, with the fastest expansion occurring in machinery and metal products.

In January, as with total new orders, growth in production was limited to the chemical, plastic, and rubber sector. The most significant slowdown in production was recorded in non-metallic mineral products. Half of the ten sectors monitored started the new year by expanding their employment. Food products increased their number of employees for the first time in the last four months. In contrast, the most significant employment loss was seen in clothing and leather product firms.

In January, due to delays caused by problems in the Red Sea, supplier delivery times extended in seven of the ten sectors covered by the report. The most significant increase in delivery times was seen in chemicals, plastic, and rubber products. Delays in deliveries occurred despite a widespread decrease in purchasing activities. Purchasing volume declined in eight of the ten sectors monitored.

"SLOWDOWN TREND IN THE SECTOR IS EASING"

In the statement, Andrew Harker, Economics Director at S&P Global Market Intelligence, said: "The PMI data for January provided positive signals that the slowdown trend in the sector is easing. The historical relationship between the PMI and official industrial production data shows a good start to the year. However, there are still some challenges for manufacturers. The rapid acceleration in cost inflation led to a high rate of increase in final product prices, which had a limiting effect on demand. On the other hand, shipping problems in the Red Sea have led to renewed disruptions in supply chains that had shown improvement in late 2023."