ICI Released May 2024 ICI Türkiye Manufacturing PMI and Türkiye Sector PMI Report

• 03.06.2024
• News

The headline PMI posted below the 50.0 no-change mark for the second consecutive month in May, dropping to 48.4 from 49.3 in April. The challenging demand environment faced by the Turkish manufacturing sector in May led to a continued slowdown in total new orders and exports. This led the firms reducing their output and staffing levels. On the other hand, inflationary pressures continued to ease in May as indicated by both input costs and finished goods prices increasing at much lower rates. 

According to the Istanbul Chamber of Industry Türkiye Sector PMI report, three out of ten monitored sectors increased their output in May. Still, this represented an improvement compared to April, when the number of sectors increasing output was two. The external demand improved in most sectors, despite the general negative outlook. Six of the ten sectors monitored managed to increase new export orders in May. In terms of employment however, there was a varied outlook between sectors. While five sectors, especially machinery and metal products, increased their staffing levels, the most significant decrease was recorded in the electrical and electronic products sector.

The April 2024 period of Istanbul Chamber of Industry (ISO) Türkiye Manufacturing PMI (Purchasing Managers’ Index) survey, which is the fastest and most reliable reference accepted in manufacturing industry performance of the economic growth, was announced. According to the results of the survey where any figure greater than 50.0 indicates overall improvement of the sector, the headline PMI posted below the 50.0 no-change mark for the second consecutive month in May, dropping to 48.4 from 49.3 in April. The latest reading signalled a modest slowdown in business conditions in the sector, but one that was the most pronounced in 2024 so far.

NEW EXPORT ORDERS SLOW DOWN FOR 11 MONTHS

The softening in the health of the sector was reflected in a range of variables from the survey in May. In particular, firms reported a solid moderation of new orders, with the pace of easing the most pronounced since January. The slowdown was often linked by panellists to challenging demand conditions, with some customers deterred by high prices. These factors also contributed to a softening of new export orders for the eleventh month.

MANUFACTURERS SCALE BACK OUTPUT

A moderation of new orders led manufacturers to scale back production for the second month running, and to the largest degree in 2024 so far. Some panellists also indicated that capacity limits had restricted their ability to expand output. Staffing levels were reduced for the fourth consecutive month, as some firms indicated a reluctance to replace departing staff given lower workloads. Purchasing activity and inventories of both inputs and finished goods were all scaled back in May, in each case following increases in April. Inflationary pressures continued to wane in May. The rate of input cost inflation eased to a five-month low, while charges increased at the slowest pace for a year. Where prices rose, respondents often linked this to currency weakness and higher raw material costs.

Commenting on the Istanbul Chamber of Industry Türkiye Manufacturing Export Climate Index, Andrew Harker, Economics Director, S&P Global Market Intelligence, said: "Latest data suggest that Turkish manufacturers are facing an increasingly challenging operating environment, with new work seemingly harder to come by. One light on the horizon comes in the form of softening inflationary pressures, however. Given the still detrimental impact high prices is having on demand, an easing of these pressures will hopefully help lead to a recovery in the sector over the second half of the year.”

COST PRESSURES EASE 

The Türkiye Sector PMI report showed that demand conditions remained challenging overall in May and new orders slowed down in the majority of sectors. This led the output in many sectors lost momentum, and more complex trends emerged in employment. The prominent positive development of the survey was the widespread easing of cost pressures. Input costs increased faster than in April in only one of the ten sectors, and a similar situation was also observed in sales prices.

THE LOWEST INCREASE IS IN THE TEXTILE SECTOR 

The only sector where cost increases accelerated in May was clothing and leather products sector. In general, the slowest increase in input costs was seen in machinery and metal products, and the highest increase in non-metallic mineral products sector. And the only sector where the finished goods prices accelerated compared to the previous month was machinery and metal products. This resulted from the increase in the pricing power of companies due to the renewed growth in new orders in the sector. The lowest increase of the survey was seen in textile products, where sales prices increased slightly. The machinery and metal products sector saw a recovery in new orders, becoming one of the three sectors showing improvement in new orders in May. Similarly, new orders returned to the growth zone in wood and paper products, and an improvement was recorded in clothing and leather products for the second month in a row. In contrast, new orders in the base metal sector, which is facing extremely challenging conditions, decreased at the fastest pace since October last year.

OUTPUT INCREASES IN 3 OUT OF 10 SECTORS 

The external demand improved in most of the sectors, despite the general negative outlook. Six of the ten sectors monitored managed to increase new export orders in May. Output increased in only three out of ten sectors. Still, this represented an improvement compared to April, when the number of sectors increasing output was two. The fastest increase in output was recorded in machinery and metal products, and the most significant slowdown was recorded in land and sea vehicles sector.

In terms of employment however, there was a varied picture between sectors. While five sectors, especially machinery and metal products, increased their staffing levels, the most significant decrease was recorded in the electrical and electronic products sector.

*You can find attached the Istanbul Chamber of Industry Türkiye Manufacturing PMI and Sector PMI May 2024 reports.