Istanbul Chamber of Industry Turkey Manufacturing PMI, which was 47.2 in November 2023, rose to 47.4 in December. The index remained below the 50.0 threshold for the sixth consecutive month.
Production and new orders continued to decline, while employment stopped contracting. The rate of increase in input costs slowed to the lowest level since May.
According to the Istanbul Chamber of Industry Turkey Sectoral PMI report, food products was the only sector that increased its new orders among the 10 sectors monitored. The sharpest slowdown in new orders was in chemicals, plastics and rubber products. The strongest increase in employment was seen in the land and marine vehicles sector.
The results of the Istanbul Chamber of Industry (ISO) Turkey Manufacturing PMI (Purchasing Managers’ Index) survey for December 2023, which is considered the fastest and most reliable reference in manufacturing industry performance, which is the leading indicator of economic growth, were announced. According to the results of the survey, where all figures measured above the threshold value of 50.0 indicate an improvement in the sector, the headline PMI, which was 47.2 in November, increased to 47.4 in December 2023, but remained below the threshold value of 50.0 for the sixth consecutive month.
In December, manufacturing industry production declined at a level close to that of November, largely due to difficult market conditions. Persistent slowdowns in both total new orders and new business from abroad signaled continued weakness in demand, which allowed firms to continue working on their backlogs in December. Despite the decline in workloads, employment remained flat in December, ending two months of contraction. Some survey respondents reported a tendency to increase capacity, while others reduced employment due to a decline in new orders and resignations.
Purchasing activity declined at the fastest pace in four months. As a result, input inventories also declined. Weak demand for inputs allowed suppliers to speed up deliveries, ending an 11-month trend of extended delivery times. The depreciation of the lira, rising wages and higher raw material prices pushed input costs higher in December as well. However, the inflation rate declined for the fifth consecutive month. On the other hand, final product prices rose at the fastest pace since August.
POSITIVE SIGNALS FOR LABOR MARKETS
Commenting on the Istanbul Chamber of Industry Turkey Manufacturing PMI survey data, Andrew Harker, Economics Director at S&P Global Market Intelligence, said: “The slowdown in the Turkish manufacturing sector in the last month of 2023 epitomized the challenging conditions that emerged in the second half of the year amid weak demand. Nevertheless, firms tended to maintain their headcounts going into the new year, which sent positive signals for labor markets. Cost pressures continued to show signs of weakening, but this did not prevent selling price inflation from slowing in December. However, the potential for inflation to decline further in 2024 may provide some optimism for demand recovery in the sector.”
NEW ORDERS SLOWED IN NINE OUT OF 10 SECTORS
The Istanbul Chamber of Industry Turkey Sectoral PMI report showed that new orders slowed in nine out of ten sectors in the last month of 2023, while they increased only in food products. A similar situation was observed for production. In contrast, a more positive picture emerged on the employment side. More than half of the ten monitored sectors increased the number of employees. On the other hand, cost inflation remained generally high. Food products were the only sector to increase new orders in December for the second consecutive month. The sharpest slowdown at the end of the year was seen in the chemicals, plastics and rubber products category. New export orders, which showed a more favorable outlook compared to total new orders, increased in four sectors, particularly in land and watercraft.
Similar to new orders, only the food products sector remained in the growth zone in production. The most notable production decline was in non-metallic mineral products, which followed the increase in November. Output and new orders were generally stagnant in December, while the outlook for employment was more positive. In November, four of the ten sectors tracked increased employment, while in December this number rose to six, the highest level since May. The sharpest increase in employment was in the land and watercraft sector. The sharpest decline was recorded in clothing and leather goods, where workloads continued to fall sharply.
INPUT COSTS CONTINUED TO RISE
Input costs continued to rise rapidly in the vast majority of sectors, with the only exception being chemicals, plastics and rubber products, where inflation declined markedly to a seven-month low. Among the ten sectors monitored by the survey, the fastest increase in input prices was recorded in land and marine vehicles. The machinery and metal products sector led the way in the rate of increase in sales prices, while the slowest increase was observed in the textile products sector, where firms tried to limit price increases to stimulate demand.
Purchasing activity weakened in almost all sectors in December, with the only exception being the food products sector, which slightly increased its input purchases. Input stocks increased in only two sectors: food producers and machinery and metal products.
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