Turkey’s Manufacturing Sector Remains Weak in September, But Domestic Demand and Investment Trends Show Promise
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September 2025 data points to continued weakness in Turkey’s manufacturing output, despite a slight rise in capacity utilization. However, improving expectations in domestic orders and investment sentiment may signal early signs of economic rebalancing.
Capacity Utilization Inches Up But Remains Below Historical Norms
Turkey’s capacity utilization rate (CUR) in manufacturing rose marginally by 0.2 percentage points in September, largely due to the reopening of auto plants after the summer holiday period. Despite the uptick, the overall CUR stood at 73.8% — still 2.5 points below its historical average, highlighting ongoing sluggishness in industrial output.
The divergence across sub-sectors continues to be a dominant theme. While non-durable goods industries such as food, apparel, and textiles remain under pressure, segments like other transportation equipment show modest growth. However, a sharp contraction in machinery and equipment production continues to weigh heavily on capital goods.
Construction-Driven Growth in Intermediate Goods
Intermediate goods production showed relative strength, particularly in sectors linked to construction. This resilience is seen as a byproduct of rising public investment and renewed momentum in housing activity, offering a limited buffer to broader manufacturing weakness.
Nonetheless, the overall outlook remains clouded by persistent external headwinds — notably weak export demand, high real interest rates, and elevated production costs.
Domestic Demand Expectations on the Rise
Despite tepid production trends, domestic demand expectations continue to recover. The easing of financial conditions — despite the Central Bank’s continued rate hikes — appears to be lifting confidence among manufacturers catering to the domestic market.
Similar optimism is reflected in the latest confidence indices from the services and retail sectors, where business volume and forward-looking expectations are both on the rise.
Broad-Based Improvement in Investment Sentiment
One of the more encouraging developments is the ongoing rebound in investment sentiment. Both large and small-to-medium-sized enterprises (SMEs) are showing increased willingness to invest — a trend supported by improved demand prospects and targeted tax incentives.
However, for this positive shift in investment appetite to become sustainable, analysts emphasize the need for continued progress on price stability, access to credit, and overall economic predictability.
