Turkish manufacturing activity improves at slowest pace in 11 months

Turkey’s manufacturing sector posted the smallest improvement in business conditions since May last year as the COVID-19 pandemic weakened demand in the economy, IHS Markit and the Istanbul Chamber of Industry (ISO) said in a monthly survey on Monday.

Manufacturing PMI, a key gauge of industry performance, fell to 50.4 in April from 52.6 in March. It had stood at 54.4 in January. Any reading above 50 reflects an overall improvement of the sector.

“The impact of the current wave of COVID-19 infections on the Turkish manufacturing sector in April was clear,” said Andrew Harker, economics director at IHS Markit. “Output and new orders softened as customers held off on committing to projects.”

The sector’s future performance will likely depend on how quickly infections in the country come down, Harker said. The weak performance was partially offset by an increase in new export orders, he said.

Daily cases of COVID-19 in Turkey spiked to a record high of more than 60,000 last month, prompting the government to re-introduce restrictions on the population. Last week, the government tightened a lockdown on the population, closing all but essential businesses. Manufacturers are exempt from the shutdown. Daily infections have more than halved since the peak to around 25,980, according to the latest data.

Inflationary pressures also remained elevated last month, as input costs rose sharply due to the lira’s weakness and an increase in import prices, IHS and the ISO said.

“Rising input costs were often passed through to customers by way of increased selling prices,” they said. “Charges increased sharply, and at a much faster pace than the series average.”

Consumer price inflation accelerated to 17.1 percent in April from 16.2 percent the previous month, the Turkish Statistical Institute said. Producer price inflation gained to 35.2 percent, the highest level since November 2018, from 31.2 percent in March.

The lira has depreciated by 13 percent against the dollar since mid-March when President Recep Tayyip Erdoğan replaced the governor of the central bank after he raised interest rates to 19 percent from 17 percent to help rein in inflation.