Manufacturing PMI points to a moderate recovery in March
The results of the Istanbul Chamber of Industry (ISO) Turkish Manufacturing PMI (Purchasing Managers’ Index) survey, the leading indicator of economic growth, for the period March 2022 have been announced.
Turkey’s manufacturing PMI from the Istanbul Chamber of Industry rose to 50.9 in March, pointing to a moderate improvement in operating conditions in the manufacturing sector compared to the previous month. Above 50 indicates growth and below 50 indicates contraction.
According to Turkey’s sectoral PMI report from the Istanbul Chamber of Industry, output in five of the 10 sectors tracked in March within the scope of the survey started growing again after slowing down in February. These sectors consisted of textiles, wood and paper products, machinery and metal products, electrical and electronic products, and land and sea vehicles. The strongest increase was experienced by textiles, which registered growth for the first time in the last three months. The most significant decline was recorded in the food products sector.
According to the survey results, in which all measured numbers above the threshold value of 50.0 indicate an improvement in the sector, the headline PMI, which was 50.1 in February, rose to 50.9 in March , indicating a moderate improvement in the operating conditions of the manufacturing sector compared to the previous month. The strengthening of operating conditions was the highest since December 2021.
INCREASED ORDERS
The fact that production and new orders returned to growth in March were decisive in the improvement of the general situation of the sector. Production in the manufacturing industry increased for the first time in the last 16 months. Some respondents continued to face disruptions due to the February earthquake, while others reported restarting production. On the other hand, reconstruction efforts in the affected areas have increased production in some companies.
New orders started to grow for the first time in the last year and a half, with a strong recovery in March. A similar development was seen in new export orders, which increased for the first time in the last year.
DECREASE IN EMPLOYMENT
Despite the increase in production requirements, employment fell for the first time in five months, buoyed by both the earthquake and the new early retirement law. Manufacturers retained the ability to manage the flow of new orders and work through backlogs. However, the decline in backorders, which was the lowest in the last 13 months, indicated that capacity pressures began to emerge in the sector.
In March, both input costs and final product prices continued to rise sharply due to raw material costs, higher wages, and exchange rate developments. However, the inflation rates in both were lower than in February.
In the same period, there were signs of relief in supply chain disruptions. Delivery times increased for the third month in a row, but the deterioration in supplier performance was much more moderate due to reduced delays due to the earthquake.
THE EFFECT OF THE EARTHQUAKE CONTINUES
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:
“After the evident effects of the earthquake observed in February, the resumption of production of the Turkish manufacturing industry in March was a welcome development. While the earthquake still had an impact on businesses, the start of rebuilding efforts generally supported the transition to growth. With new orders picking up, we expect the relatively weak conditions that businesses have been facing for nearly a year to come to an end.”
FIVE OUT OF 10 SECTORS ARE GROWING AGAIN
According to the Istanbul Chamber of Industry Turkish Sector PMI report for March, six of the 10 industries tracked within the scope of the survey increased their output, while five industries resumed growth after the slowdown in February. These five sectors were textiles, wood and paper products, machinery and metal products, electrical and electronic products, and land and sea vehicles.
The strongest increase was experienced by the textile sector, which registered growth for the first time in the last three months. On the other hand, even in sectors where output continues to slow, declines moderated compared to the previous survey period. The most significant decline was recorded in the food products sector.
NON-POSITIVE DEMAND EVOLUTION
The increase in new orders in only four of the 10 sectors in March indicated that the evolution of demand was not as positive as that of production. The fastest improvement in new orders was recorded in the land and marine vehicle sector. This increase, which was the highest since August 2021, also led to increases in production, employment, purchasing activities, and inventories.
The biggest slowdown in new orders was in the chemicals, plastics and rubber sector, which saw a drop for the first time in four months.
With the effect of pricing power provided by improving demand in the land and marine vehicle sector, the biggest price increase in the last seven months has been in end products. Apart from land and sea vehicles, the only sector where final product price inflation accelerated was clothing and leather goods.
Input cost inflation slowed across most sectors in March. Although the most significant increase in input prices was registered in machinery and metal products, the most moderate increase was registered in the chemical, plastic and rubber products sectors. While supply chains showed signs of improvement, delivery times in the base metals and textiles sectors tightened last month, while delays in many other sectors were milder than in February.