Manufacturing activity in Türkiye saw a slight improvement in September but still contracted for the third consecutive month, although only slightly because of a less pronounced slowdown in output and new orders, a survey showed Monday.

A similar survey showed eurozone manufacturing activity remained mired in a deep and broad-based downturn last month, as demand kept shrinking at a pace rarely surpassed since the data was first collected in 1997.

Türkiye's Purchasing Managers' Index (PMI) for manufacturing rose to 49.6 from 49.0 in August, according to the survey by the Istanbul Chamber of Industry (ISO) and S&P Global, holding just below the 50-point line that denotes growth in activity.

Production eased for the third month running, reflecting weak market conditions and a slower pace of new business coming in. Some firms saw demand holding up over the month, however.

Anecdotal evidence showed price pressures restricted customer demand and hence new orders slowed overall, but at a softer pace than that of August.

Input costs and output prices rose because of currency weakness but the rate of inflation slowed, while employment continued to rise slightly. However, some firms scaled back staffing amid fewer new orders.

"There were signs of stabilization in the Turkish manufacturing sector during September as some firms reported that demand had held up well over the month," said Andrew Harker, economics director at S&P Global Market Intelligence.

"Although business conditions remained challenging overall, the latest data provide some hope that a return to growth can be recorded before the end of the year. One help to firms in September was a marked easing of inflationary pressures."

Recession in manufacturing

HCOB's final eurozone PMI, compiled by S&P Global, dipped to 43.4 in September from August's 43.5, matching a preliminary estimate.

An index measuring output, which feeds into a composite PMI due on Wednesday and is seen as a good gauge of economic health, fell to 43.1 from 43.4.

"The output PMI was well under 50 for the entire third quarter, so we are feeling pretty certain that the recession in manufacturing continued during this period," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"In the race to the bottom, France and Germany are leading the way in the September PMIs. Meanwhile, Spain and Italy are pulling through somewhat less scathed."

The new orders index did rise last month, to 39.2 from August's 39.0, but it remained firmly below the breakeven mark.

That fall in demand came despite the three-month average of prices charged by factories decreasing faster than at any point in the survey's history other than during the Great Recession in 2008/2009, added HCOB's de la Rubia.

Policymakers at the European Central Bank (ECB) – who have so far failed to get inflation back to target – may welcome news of falling prices.

Last month they raised their key interest rate for a 10th consecutive time but are likely now done and will stay on hold until at least July next year, according to economists in a Reuters poll.

Sharp slowdown in U.K.

Elsewhere, manufacturing activity in the United Kingdom slowed sharply in September, though less steeply than the month before when it shrank at the fastest rate in over three years.

The S&P Global/CIPS PMI remained well below the 50 level, edging up to 44.3 in September from August's reading of 43.0, which was the lowest since May 2020.

September's figure was a fraction higher than an initial "flash" estimate of 44.2.

"The end of the third quarter saw the downturn at U.K. manufacturers continue. Output, new orders and employment were all cut back further, amid weaker intakes of new work from both domestic and overseas clients," S&P Global said.

The most recent official data showed British manufacturing output fell 0.8% in July although volumes were 3.0% higher than a year earlier.

S&P said 55% of manufacturers expected growth over the next 12 months, fewer than in August, while 9% expected a contraction.

"Optimism was linked to a hoped-for market recovery, planned growth initiatives and a more stable inflationary environment," S&P said.

The fall in overseas demand was broad, spanning customers in mainland Europe, the United States, China and Brazil, reflecting a subdued global economy.

Manufacturers raised prices for the first time in four months as they sought to rebuild squeezed profit margins, although the increase was small. Input costs fell sharply, especially for metal and energy.

The Bank of England is keeping a close eye on factors affecting inflation, including factory-gate prices and companies' profit margins, as consumer price inflation of 6.7% is more than triple the BoE's 2% target.

Strong growth in Russia

Activity in Russian manufacturing grew at its fastest pace in over six years in September, while employment in the sector rose at its quickest rate in over two decades.

The PMI for manufacturing rose to 54.5 from 52.7 in August, marking the highest reading since January 2017.

"Stronger client demand, new product launches and successful import substitution reportedly drove the upturn," S&P Global said in a statement. "The acceleration in growth was led by domestic demand, as new export orders increased at a slower and only marginal pace."

The sector's growth in over 19 months since Russia's full-scale invasion of Ukraine began has been largely predicated on domestic demand.

"Challenging economic conditions in key markets were noted as weighing on the rise in sales from abroad," S&P Global said.

Companies also noted that unfavorable exchange rate movements pushed up the price of imported goods, S&P Global said, but expectations of future output improved compared with August in hopes of stronger client demand and successful import substitution.

"A greater inflow of new work led firms to expand production capacity in September," S&P Global said. "Buoyed by stronger expectations of increased output over the next year, manufacturers registered the sharpest rate of job creation since November 2000."

Japan extends declines

In Asia, Japan's factory activity fell at the fastest pace in seven months in September, as worsening global economic conditions continued to weaken demand.

The final au Jibun Bank Japan PMI fell to 48.5 in September from 49.6 in August and roughly in line with the flash reading of 48.6. The index has remained below the 50.0 point threshold for four straight months.

Output in September was the lowest since June while the decline in new orders was the steepest since February, S&P Global Market Intelligence data showed.

"Depressed economic conditions domestically and globally weighed heavily on the sector," said Usamah Bhatti, economist at S&P Global Market Intelligence.

New export orders have remained in contraction for 19 consecutive months, due to softer demand from mainland China and Taiwan.

Besides higher raw material, oil, freight and energy prices, the weak yen drove up input price inflation, which hit a four-month high in September, according to S&P.

The yen has come under pressure in recent months, weighed by the Bank of Japan's ultra-loose monetary policy that has inflated the costs of imported goods and squeezed manufacturers.

Voluntary resignations in September outpaced filling existing vacancies, leaving the subindex employment figure unchanged from the previous month.

The pessimistic headline figure followed government data published last week that showed Japanese factory output remained flat in August.

Japanese manufacturers' future output expectations rose again after hitting the weakest level in growth in six months in August, S&P said.