PMI manufacturing unchanged in February

The February 2022 results of the Istanbul Chamber of Industry (ISO) Turkish Manufacturing PMI (Purchasing Managers’ Index) survey, the leading indicator of economic growth, were announced.

The ISO Turkey Manufacturing PMI was unchanged at 50.1 in February, indicating that operating conditions remained stable across the manufacturing sector. Values ​​below 50 indicate contraction, while values ​​above 50 indicate growth.

EFFECT OF THE EARTHQUAKE ON THE MANUFACTURING SECTOR

Due to the difficulties caused by the earthquake in the supply and delivery of supplies, the delivery times of suppliers registered the highest rate increase in the last 10 months. The earthquake also reduced the volume of production in the sector by interrupting operations in some companies.

According to the report, production declined in nine out of 10 sectors, as some companies had to suspend production in February. Only the basic metallurgical industry has grown and the growth of this sector has reached the highest rate of the last two years. Again, due to the earthquake, supplier delivery times increased in all sectors except food and non-metallic mineral products.

HAS NOT CHANGED IN FEBRUARY

Based on the survey results, where all measured numbers above the threshold value of 50.0 indicate improvement in the sector, the headline PMI was unchanged at 50.1 in February, indicating that conditions Operating costs were flat across the manufacturing sector. However, the significant increase in supplier lead times was effective in keeping the overall index above the threshold value of 50.0.

In addition to its effects on supply chains, the earthquake also disrupted the operations of some companies and caused a decrease in the volume of production in the sector. However, the decline in question remained moderate and was the second lowest rate in the past one-year period.

SLOW ON NEW ORDERS

The slowdown in new orders also gained momentum in the aftermath of the earthquake. However, the drop was recorded at the second most moderate level in the last 16 months. Both total new orders and new export orders lost momentum in February.

The paralysis of the production lines and the difficulties experienced in the supply of products caused manufacturers to reduce their purchasing activities and reduce their stocks of inputs. Problems with supply and production have led some companies to draw on existing stocks to meet their ordering requirements. As a result, finished goods inventories decreased by the most since December 2021.

In addition to raw material costs and wage increases, exchange rate developments caused input prices to rise significantly in February as well. Input price inflation varied little with respect to January and was generally close to the average for the series. Consequently, the prices of finished products also increased strongly, but said increase remained below the average registered throughout 2022.

Commenting on Turkey’s manufacturing PMI survey data from the Istanbul Chamber of Industry, Andrew Harker, director of economics at S&P Global Market Intelligence, said:

“The terrible earthquake in February negatively affected the Turkish manufacturing sector, especially production lines and supply chains. We expect to see signs of recovery in the regions affected by the earthquake and throughout the industry in the coming months.”

THE MAIN METAL INDUSTRY GROWED

According to the Istanbul Chamber of Industry Turkish Sectoral PMI report for February, after January, when production increased in eight out of 10 sectors tracked, only one sector was able to increase its production in February due to the impact of the earthquake.

The growth, which was limited only to the basic metallurgical industry, reached the highest speed of the last two years in this sector. After food products, where the largest drop in production was experienced, the second largest drop occurred in the electrical and electronic products sector.

The number of sectors that increased their new orders decreased from seven in January to three in February. On the other hand, new export orders expanded in four sectors, mainly machinery and metal products.

EMPLOYMENT

Despite the negative impact of the earthquake on production, most sectors continued to increase employment in February. The strongest increase in employment was observed in machinery and metal products, while the most significant decline was observed in the textile sector, where production continued to contract. Input cost inflation generally eased in February.

While the increase in input prices gained momentum in only two sectors, these sectors were clothing and leather goods, land and sea vehicles, which were hit hard by disruptions in supply chains. By the middle of the first quarter, sales price inflation slowed across many sectors and remained below 2022 averages across all sectors.