Turkey: November manufacturing PMI falls to 45.7 from 46.4 in october

According to the data announced by the Istanbul Chamber of Industry (ISO) and S&P Global; Manufacturing PMI fell from 46.4 to 45.7 in November. The headline PMI remained below the 50 threshold for the ninth consecutive month (the longest contraction streak after 2019), signaling a sharp slowdown in industry performance. This slowdown is the most significant slowdown since May 2020, when the COVID-19 wave hit activity. In November of last year, PMI was realized at 52 level.

If we look at the details of the PMI data; new orders fell to 42.7 from 43.5 in October, marking the 14th consecutive monthly contraction. Weakness in both domestic and foreign demand seems to have played a role in this. New export orders also exhibited the most significant loss of momentum in the last two and a half years. The US and Europe stood out as the main source of the decrease in demand in new export orders.

Input costs inflation slowed sharply in November, and the increase in input prices was at the slowest pace in the last three years. While the increase in raw material prices and the depreciation of the lira were effective in the increase in costs, the low demand for inputs had a restraining effect on inflation. Employment started to rise again in November after two months of decline. On the other hand, this increase was very limited.

Turkey PMI Index… Source: Istanbul Chamber of Industry, S&P Global, Tera Yatırım

The data released show that the slowdown trend from the previous months has become very clear. The weak effect from the external demand channel caused by the global recession expectations, especially in Europe, causes a slowdown in exports. In addition, although the domestic consumption trend continues, the negative effects of the high inflation environment bring clear signs of slowdown. Negative expectations in demand components cause a slowdown and then a contraction in production volume, as reflected in industrial production data.

There is a sharp loss of pace in economic activity, as evidenced by the leading indicators. On the production side, the weakness in demand components and additionally the costs, especially energy, from the high inflation environment may continue to have a negative impact. We think that the cost pressure of the sector may also increase by the labor force in addition to the input effect we mentioned in the new year. The expected minimum wage increase may cause businesses to reduce employment due to rising labor costs. Growth for 4Q22 appears to be lower than what happened in 3Q22. Due to the slowdown in the growth momentum, it can be expected that the government will implement expansionary policies more rapidly from the beginning of the year.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı