ICI Released June 2023 Türkiye Manufacturing PMI and Türkiye Sector PMI Report

• 03.07.2023
• News

Istanbul Chamber of Industry Türkiye Manufacturing PMI, which is recognized as the fastest and reliable reference in manufacturing industry performance, the leading indicator of economic growth, posted 51.5 for the third month running in June, signalling a further modest improvement in the health of the manufacturing sector. Business conditions have now strengthened in each of the past six months. The main positive aspect from the latest survey was a solid and accelerated rise in manufacturing production. Output was up for the fourth month running, with the rate of growth the fastest since July 2021.

According to the ICI’s Manufacturing Sector PMI June report, the inflationary pressures due to the depreciation of the Turkish lira increased in the manufacturing sector in general. There were strong output increases in some sectors, primarily in machinery and metal products. Output expanded in four sectors, while land and sea vehicles sector remained the same in June compared to May. New orders improved in all the sectors whose output was also increased, except for one, which is textile products sector. The fastest increase in new orders was in food products sector. Depending on weak foreign demand conditions, only two out of 10 monitored sectors saw a growth in export. Half of the sectors saw increase in employment.

Istanbul Chamber of Industry (ICI) released its June 2023 Türkiye Manufacturing PMI (Purchasing Managers’ Index) survey, the fastest and reliable reference accepted in manufacturing industry performance of the economic growth. According to the results of the survey, where any figure greater than 50.0 indicates overall improvement of the sector, the headline PMI was above the 50.0 no-change mark for the third consecutive month in June, signalling continuing slight improvement in the manufacturing industry. Business conditions have now strengthened in each of the past six months. 

The main positive aspect from the latest survey was a solid and accelerated rise in manufacturing production. Output was up for the fourth month running, with the rate of growth the fastest since July 2021. Alongside improvements in demand, firms also attributed the latest rise in production to an ongoing recovery from the earthquake and a pick-up in activity following the election period. 

While new orders rose for a fourth straight month, the rate of increase was only marginal and the softest in the current sequence of expansion. The slowdown in growth was partly reflective of a depreciation of the Turkish lira against the US dollar, anecdotal evidence showed. 

Exchange rate fluctuations also contributed to reaccelerations in both input cost and output price inflation in June after sustained slowdowns in previous months. Input prices increased at the fastest pace in just under a year, while charges were up to the greatest extent since February. 

Meanwhile, suppliers' delivery times lengthened markedly as vendors struggled to respond to increasing demand for inputs. Accordingly, firms used existing holdings of items to support production, leading to a reduction in stocks of purchases. 

Job creation was signalled for the second month running in response to greater production requirements. The rate of expansion was modest, but slightly faster than that seen in May. Backlogs of work increased, however, for the second time in the past three months. 

Commenting on the Istanbul Chamber of Industry Türkiye Manufacturing PMI survey data, Andrew Harker, Economics Director at S&P Global Market Intelligence, said: 

“Manufacturing production kicked on nicely in June, and the goods-producing sector as a whole finished the first half of the year in broadly positive shape as demand improved further. Firms were battling the familiar foe of currency weakness, however, which limited new order growth and brought an abrupt halt to the recent easing of inflationary pressures. More positively, manufacturers continued to expand their employment levels and purchasing activity, suggesting that they remained optimistic about prospects for the second half of the year.”

Inflation pressures deepened in all the manufacturing industry

According to the ICI’s Manufacturing Sector PMI June report, the inflationary pressures due to the depreciation of the Turkish lira last month increased in the manufacturing sector in general. New orders increased in only three sectors out of 10 monitored sectors, pointing out the negative impact of inflationary pressures on demand in some sectors. Some sectors, primarily machinery and metal products, achieved strong output increases. Output expanded in total of four sectors, while land and sea vehicles sector remained the same in June compared to May. In other words, output slowed down in half of the sectors. 

All the sectors which increased their output also improved their new orders, except for one, which is textile products sector, where orders slightly decelerated. The fastest increase in new orders was in food products, while the significant deceleration was in clothing and leather products sector. The outlook in total new orders was more positive than new export orders. 

Depending on weak foreign demand conditions, only two out of 10 monitored sectors saw a growth in export. 

Most of the sectors had increased input costs inflation. The significant acceleration in inflation was in chemical, plastic and rubber products sector, while the sharpest increase in costs was in machinery and metal products. The latter had also the fastest increase in sales prices at the end of the second quarter. Final product prices inflation also increased in general, reflecting the developments in input costs. The slowest increase in sales prices was in non-metallic mineral products. 

Half of the monitored sectors increased their staffing level with the strongest one being in chemical, plastic and rubber products sector. And the highest decrease in job creation was seen in clothing and leather products sector where new orders slowed down. Purchasing activities varied among the sectors. Input purchases accelerated in half of the sectors, and decelerated in the other half. Suppliers’ lead times also increased in most of the sectors, with the longest delays in deliveries were seen in machinery and metal products sector.

You can find attached the Istanbul Chamber of Industry Türkiye Manufacturing PMI and Sector PMI June 2023 reports.