Subdued demand conditions continued to weigh on Türkiye's manufacturing sector midway through the third quarter, according to a closely watched survey on Monday that still signaled moderation in the health of the sector.
The country's factory activity contracted for the fifth month in a row in August, as a slowdown in demand caused firms to scale back output, employment and purchasing activity.
The Purchasing Managers' Index (PMI) for Turkish manufacturing ticked up to 47.8 in August, up from 47.2 in July, according to a survey by the Istanbul Chamber of Industry (ISO) and S&P Global.
Despite the marginal increase, the reading still indicated a decline in overall sector health, as it remains below the crucial 50.0 threshold that separates growth from contraction.
While new orders softened less severely than in July, input stocks saw their sharpest reduction in over a year as firms opted to limit inventories amid weak demand, the survey showed.
One of the key challenges for the sector remained rising input costs, which led manufacturers to raise their output prices at a faster pace than in the previous month.
The headline PMI is a composite single-figure indicator of manufacturing performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.
The survey said business conditions have softened continuously since April.
New orders softened for the 14th consecutive month amid challenging market conditions. "The rate of moderation was solid, despite easing to the weakest since May," the survey read.
The picture for international demand was more positive, with new export orders returning to growth in August for the first time since June 2023.
The reduction in overall demand conditions was evident across various metrics.
Companies scaled back production, employment and purchasing activity in August. And price pressures exacerbated the slowdown in production, which was the most pronounced since November 2022.
The survey said input costs continued to rise at a marked pace, albeit one that was slightly softer than in July.
"Currency weakness was the principal factor leading to higher input prices, while there were also reports of increases in costs for raw materials and logistics," it added.
Manufacturers raised their own selling prices in response to higher input costs. Moreover, the rate of inflation quickened for the second month, running at the fastest since April.
Stocks of inputs, both purchases and finished goods, were cut back significantly, with the most notable drop in stocks of purchases recorded since July 2023.
Andrew Harker, economics director at S&P Global Market Intelligence, said Turkish manufacturers "again struggled" to generate new order growth during August, despite some encouraging signs with regards to exports.
"The subdued overall demand picture led to further scaling back of production, employment and purchasing, with firms also showing a reluctance to hold inventories," said Harker.
"Hopefully, the nascent recovery in exports seen in August will solidify in the months ahead and spread more widely to help the sector move into recovery mode."