Turkey’s Industrial Production Contracts Sharply in April: Where Is the Trend Headed?

Turkey’s industrial production data for April paints a complex picture of a manufacturing sector caught between short-term volatility and longer-term uncertainty. Analysts from Garanti BBVA and Akbank agree that the steep monthly contraction reflects both a normalization from March’s unusually strong output and deepening financial and geopolitical pressures. Capital goods production, particularly in high-tech and defense-linked sectors, appears to be the main culprit behind the downturn—highlighting the vulnerability of investment-related manufacturing to tightening monetary policy and rising costs.

April Data: Growth Year-on-Year, But a Steep Monthly Decline

According to official data, industrial production in April 2025 declined by 3.1% month-on-month, reversing the 3.4% surge recorded in March. On a yearly basis, output grew by 3.2%, but this was primarily due to base effects and calendar adjustments. Excluding energy, all major manufacturing categories posted declines. Capital goods manufacturing saw the steepest drop, down 9.7% from the previous month, contributing 2.3 percentage points to the total 3.1% contraction.

The most striking collapse came from high-tech manufacturing, which plunged by 32.8% on a monthly basis. Production of computers, electronics, and optical products fell 19.3%, while other transport equipment—including defense-related vehicles—slumped by 30.9%. Sectors already under financial strain, such as apparel and leather, also suffered: apparel production declined 9.8%, leather goods by 8.7%, and textiles by 3.3%.

The breadth of the slowdown is notable: whereas 15 sub-sectors saw growth in March, only six recorded increases in April. Analysts attribute this sharp swing to tightening financial conditions, rising loan costs, and lingering uncertainty following the March 19 market volatility.

Garanti BBVA: Trend Shows Deceleration Across Key Sectors

Garanti BBVA notes that despite a 3.3% annual increase in calendar-adjusted output, the 3.1% monthly drop in production signals a deteriorating short-term trend. On a three-month moving average basis, industrial output shrank by 0.5%—a reversal from March’s 1.7% gain.

Among industrial sub-sectors, only the automotive industry posted a notable recovery in April. Textile, chemical, mineral (cement, glass), furniture, and mining sectors all deteriorated compared to the previous month. Garanti BBVA highlights that energy output remained relatively robust, acting as a partial offset.

While annual growth rates may appear stable, the quarterly momentum is slipping, and April’s data suggest that domestic manufacturing is losing steam. The bank maintains its 2025 GDP growth forecast at 3.5% but warns that achieving a balanced growth path is critical for sustaining macroeconomic stability.

Akbank: Volatility in Capital Goods Drives Overall Weakness

Akbank’s analysis focuses on the heavy volatility in capital goods, particularly those sectors that had shown exceptional performance in March. The contraction in April, it argues, reflects a correction in those very segments: computers, electronics, optical equipment, and defense-related vehicles. The combined impact of these drops was a significant driver of the overall contraction in output.

Beyond capital goods, broader weakness across textiles, apparel, and metal products also points to financial tightening and global uncertainty as underlying causes. Akbank suggests that bridge holidays around Ramadan may have contributed slightly to reduced working days, but not significantly.

Looking ahead, Akbank expects the weakening trend to persist through Q2, with only a possible reversal in Q3 if the Central Bank of Turkey begins cutting interest rates. A potential rebound in global demand—especially following a long-term resolution to the U.S.–China trade war—could also support recovery in exports and manufacturing.

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Broader Economic Signals: Mixed Outlook for Q2

Recent macro indicators offer a patchy view of Turkey’s economic momentum:

• Global and Local PMI Data: While the global composite PMI rose to 51.2 in May, Turkey’s manufacturing PMI fell to 47.3, signaling 21 consecutive months of contraction in the sector.

• External Trade: In May, exports rose by 4% and imports by 6% on a three-month rolling basis. The trade deficit’s expansion slowed from 13% to 9%, while April tourism figures rebounded by 8% year-on-year to 3.9 million visitors.

• Credit Conditions: Consumer and auto loan rates rose 3 percentage points in May, while business loan rates remained flat. Credit growth gained only modest pace compared to April.

• Consumer and Business Confidence: All non-consumer confidence indices weakened in May, particularly in retail trade.

• Housing and Automotive Markets: Real estate sales and price growth accelerated in April, while the auto market saw renewed momentum and a narrowing in the sector’s production contraction.

• Investment Activity: Capacity utilization improved, and capital goods production moved from contraction to expansion—a tentative sign of stabilizing investment appetite.

Outlook: A Fragile Path Forward

While Turkey’s economy grew by 2.0% in Q1 2025—slightly below the market consensus of 2.3%—the forward indicators suggest increasing pressure on manufacturing. Domestic demand continues to support growth, albeit at a slower pace, while external demand remains a drag.

The Turkish economy faces a fragile balancing act. Further monetary tightening may deepen industrial weakness, while premature easing could reignite inflation risks. A resolution in global trade disputes and signs of financial stabilization could offer the best hope for a rebound in Q3.

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