According to the Istanbul Chamber of Industry (ISO) Manufacturing Purchasing Managers’ Index (PMI) for October 2023, the PMI fell to 48.4, the lowest level of the year, down from 49.6 in September 2023. The primary reason for this decline was the sharpest slowdown in new orders in nearly a year, which has led to a renewed downward trend in employment. With the slowing economy, inflationary pressures have eased.
According to the Istanbul Chamber of Industry Turkey Sectoral PMI report for October, production increased in only two of the ten sectors monitored, while employment decreased in most sectors. On the other hand, input costs and final product prices inflation continued their recent trend, slowing down in most sectors.
Manufacturers reported weak domestic and international demand in October. As a result, total new orders and new export orders lost momentum. The slowdown in total new orders was the highest since November of last year. As a result of this trend in new orders, production continued to decline in October. Thus, a loss of momentum in production was observed for four consecutive months.
The slowing economy has been helping ease inflationary pressures
In October, employment decreased again, ending a five-month expansion period. Survey participants highlighted resignations and retirements. Despite the decrease in the number of employees, firms recorded the fastest decline in backlogs in nearly a year. Due to the reduction in order requirements, manufacturers also reduced their input and final product inventories. Inflationary pressures continued to ease in the early fourth quarter. The rates of increase in input costs and final product prices decreased for the third consecutive month. Companies that reported price increases mostly attributed it to the depreciation of the Turkish lira.
S&P Global Market Intelligence’s Director of Economics, Andrew Harker, commented on the Istanbul Chamber of Industry Turkey Manufacturing PMI data, saying, “Demand conditions were the main factor slowing down the Turkish manufacturing sector in October, as firms struggled to secure new orders in volumes that would support production and maintain employment levels. On the other hand, the continuing easing of inflation pressures may provide some optimism about the possibility of a more favorable demand environment in the near term.”
The Istanbul Chamber of Industry Turkey Sector PMI report for October revealed that, among the 10 sectors monitored, only two saw an increase in production, while employment decreased in most sectors. Meanwhile, inflationary pressures in both input costs and final product prices continued to affect most sectors.
Due to weak domestic and international demand, new orders have slowed down across all sectors monitored for over a year for the first time. The textile sector showed the most significant decline, reaching the highest rate of decrease in the past 12 months. The mildest decline in new orders was in the food products sector.
The strongest performance in production was seen in the food products sector, which saw a slight increase compared to the previous month. Consequently, the sector has shown growth over the last three months. The other sector that increased production in October was machinery and metal products. The most significant slowdown was observed in textile companies.
Firms continued to be cautious in hiring decisions in October due to the decrease in production requirements. Among the ten sectors monitored, only three saw an increase in employment. The machinery and metal products sector, which recorded the highest increase in the past five months, was also the sector that expanded its employment most rapidly. On the other hand, the textile sector saw the most significant decline in employment, just like in production and new orders.
In October, eight of the ten sectors monitored saw a decrease in inflation in input costs. Machinery and metal products, as well as clothing and leather products, were exceptions to this trend. The slowest increase in input prices occurred in the machinery and metal products sector, which measured the lowest inflation rate in nearly four years. The easing of cost inflation and challenging demand conditions led to primary metal firms cutting their final product prices for the first time in the past 32 months. Textile companies also lowered their prices, while all other remaining sectors continued to experience price increases. The most significant price increase was observed in food products.
Finally, in October, purchasing activity decreased across all sectors for the first time in over a year. Among the ten sectors monitored, the weakest performance was once again observed in the textile sector.