Istanbul Manufacturing PMI Signals Slowdown at Lowest Rate in 8 Months, Yet Remains Mild

Foreks - The Istanbul Chamber of Industry's Turkey Manufacturing PMI rose to 49.1 in December, indicating that the slowdown in the manufacturing sector occurred at the lowest rate in the last eight months and at a very moderate level. The near cessation of deterioration in operating conditions within the sector was consistent with the outlook depicted by many sub-indices in the latest survey. The results of the Istanbul Chamber of Industry (ISO) Turkey Manufacturing PMI (Purchasing Managers' Index) survey for December 2024 were released, which is considered the fastest and most reliable reference for manufacturing performance and a leading indicator of economic growth. According to the survey results, which indicate that all figures measured above the threshold value of 50.0 signal an improvement in the sector, the headline PMI rose from 48.3 in November to 49.1 in December, indicating that the slowdown in the manufacturing sector occurred at a very mild level, the lowest in eight months. The near cessation of deterioration in activity conditions within the sector was consistent with the outlook depicted by various sub-indices in the latest survey. With relative improvement signals in demand, the decline in production eased to a moderate level and was recorded at the lowest rate of the current nine-month slowdown period. Conversely, due to ongoing pressures on demand, the slowdown in new orders continued. Although this slowdown is still pronounced, it was recorded at the lowest level since April. Similarly, the contraction in new export orders also occurred at a milder rate. Due to the slowdown in new orders, manufacturers reduced their purchasing activities, inventory levels, and employment. The decrease in employment followed the increase seen in November. However, declines in all three indicators occurred at very moderate levels. Input costs increased significantly in December, with firms attributing this rise to the increase in raw material prices and the depreciation of the Turkish lira against the dollar. Although input cost inflation rose to the highest level in the last three months, it remained well below the average for 2024. Final product price inflation fell to the slowest pace in over five years, with increases recorded at a moderate level. Some firms raised their final product prices due to rising raw material costs, while others offered price discounts to secure sales. Commenting on the Istanbul Chamber of Industry's Turkey Manufacturing PMI survey data, Andrew Harker, Director of Economics at S&P Global Market Intelligence, stated: “Turkey's PMI data set for the end of 2024 paints a promising picture for the sector in 2025. While the slowdown in activity conditions continues, it has occurred at a very mild level, and many sub-indices in the survey showed signs of improvement. If this trend can be sustained at the beginning of 2025, we may see the sector returning to growth. The inflationary environment being much more moderate compared to previous years will also support the sector's future performance. The increase in final product prices in December was very mild and at the lowest rate recorded in over five years.” According to the sectoral PMI, production and new orders broadly slowed in December. According to the Istanbul Chamber of Industry's Turkey Sectoral PMI report for December, nine out of the ten sectors monitored in the survey slowed their production in November, while the reduction in this number to seven in December signified a relative improvement. The sharpest decline in production occurred in the clothing and leather products sector, while growth was only observed in the chemical, plastic, rubber, and food products sectors. The upward trend in the food sector's production reached its third month. No changes were observed in electrical and electronic products compared to the previous month. Similar to production, increases in new orders were limited to the chemical, plastic and rubber products as well as the food products sectors. In other sectors, especially the basic metals industry, contractions were recorded. New export orders also slowed in seven out of the ten tracked categories. Employment volume increased among food manufacturers and machinery and metal products firms while showing a decrease in other sectors. The most significant reduction in employee numbers was observed in the clothing and leather products sector. A similar pattern was observed in purchasing activities, where input purchases only recorded increases in the chemical, plastic, rubber products, and food sectors. Signals indicating a slight easing of inflationary pressures strengthened in December. In most sectors, the rise in input costs slowed compared to November. The fastest increase in input prices occurred in non-metallic mineral products, while the slowest increase was in basic metals. Inflation in the basic metals sector was measured at the lowest level recorded in over five years. Due to the decline in cost inflation and the stagnation in demand, the textile, clothing-leather, and basic metals sectors implemented discounts on sales prices. As a result, the number of sectors with decreased sales prices increased from two in November to three in December. On the other hand, the most pronounced increase in product prices was noted in the machinery and metal products sector, where inflation reached the highest level since March.