Factory activity in Türkiye expanded at a steady pace in June, a closely watched survey showed Monday, although new orders growth slowed and price pressures grew as the currency weakened.

The Purchasing Managers' Index (PMI) for manufacturing came in at 51.5 in June, unchanged from the previous two months, staying above the 50-point line that separates expansion from contraction, the Istanbul Chamber of Industry (ISO) and S&P Global said.

Output was up for the fourth month running, the survey showed, with the rate of growth being the fastest since July 2021. Alongside improving demand, firms also attributed the rise to the ongoing recovery from February's major earthquakes and a pick-up in activity following the Turkish election.

"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," said Andrew Harker, Economics Director at S&P Global Market Intelligence.

"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," Harker added.

The Turkish lira has declined 28% so far this year, largely after the economic authorities took steps since President Recep Tayyip Erdoğan was reelected on May 28, including changing course after two years of monetary easing.

As part of the policy pivot, the country’s central bank increased its benchmark policy rate by 650 basis points last Thursday, lifting its one-week repo rate to 15%. The monetary authority has also simplified some of the macroprudential measures it had implemented in a drive to boost the lira.

The survey showed input cost inflation for factories accelerated sharply in June and was the most pronounced since July last year, with respondents citing unfavorable exchange rate movements as the main cause.