The lockdown effect on manufacturing: PMI falls below the threshold

Istanbul Chamber of Industry (ISO) Turkey Manufacturing Purchasing Managers Index (PMI) declined to 49.3 in line with the COVID-19 restrictions. Thus, the index dropped below the 50 threshold for the first time since May 2020. Output slowed in seven out of ten sectors in the same period.

The decline in Manufacturing PMI to 49.3 indicate a contraction in the sector activities. New orders and output slowed while the depreciation in TRY paved the way for input costs and sales prices to increase.

In line with the spread of COVID-19, the Turkey Manufacturing PMI Index saw 50.4 in April, the lowest level in the last 11 months. Any figure lower than 50 points indicates contraction.

The sub-index indicating new orders in the manufacturing industry decreased from 47.4 to 46.4 in May. The decrease stemmed from the pandemic, according to manufacturers joined the survey. New export orders, meanwhile, dropped from 51.2 to 48.8 in this period and shrank again after a 4-month increase.

The output sub-index fell from 47.3 to 46.1 in May, compared to the previous month. However, employment continued to increase despite the index saw the lowest level in the last 12 months.

The sector’s input and raw material costs sharply rose due to problems in the supply chain and depreciation in TRY. Companies reflected the input price increase on the output prices.

“The COVID-19 lockdown adversely affected the manufacturing industry as expected. Firms will be hoping that the lockdown had the desired effect in bringing infections under control, and that a swift return to growth will be seen now as measures have started to ease. Less transitory seem to be the problems in supply chains, which remained widespread in May and contributed to strong inflationary pressures,” said IHS Markit Economics Director Andrew Harker in a statement.

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