Factory activity in Türkiye contracted for a second month in August due to a slowdown in new orders as firms faced challenges securing business, according to a survey released Friday.

Similar private surveys showed manufacturing output in the eurozone once again took a downturn midway through the third quarter, continuing the sector's recession, while an unexpected rebound in China offered some hope for export-reliant economies.

Türkiye’s Purchasing Managers' Index (PMI) for manufacturing fell to 49 in August from 49.9 in July, according to the survey by the Istanbul Chamber of Industry (ISO) and S&P Global, dropping further below the 50-point line that denotes growth in activity.

Firms said the key factor deterring customers from committing to new orders was strong price pressure as input costs increased sharply due to the Turkish lira's weakness against the U.S. dollar and to rising wages.

Output prices also increased, with survey contributors reporting scaling back production and purchasing activity due to a slowdown in new business.

Nevertheless, employment increased for the fourth month running as some firms kept hiring, the survey showed.

"It was a familiar story for the Turkish manufacturing sector in August, with price pressures acting to restrict demand and leading to a general moderation of business conditions," said Andrew Harker, economics director at S&P Global Market Intelligence.

"The rate of job creation was only fractional, so it remains to be seen if this growth will continue should demand conditions remain subdued," he added.

Downturn eases

In Europe, HCOB's final eurozone manufacturing PMI, compiled by S&P Global, rose to a three-month high of 43.5 in August from July's 42.7, albeit below a preliminary reading of 43.7.

The score still signaled another sharp deterioration in the manufacturing economy.

Production came under pressure due to rapidly weakening demand and an accelerated depletion of backlogs, said the panel.

The ease in the downturn suggested the worst may be over for the bloc's beleaguered factories although demand weakened to its lowest point in almost a year.

An index measuring output, which feeds into a composite PMI due on Tuesday and seen as a good gauge of economic health, rose to 43.4 from 42.7.

Germany, Europe's biggest economy, remained a negative outlier among the continent's big players, and factory activity weakened in much of Asia as manufacturers there felt the pinch from rising input costs and slowing global demand.

"These numbers aren't as terrible as they might look at first glance," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"All of the 12 sub-indices have moved upwards or remained practically unchanged, showing that the downward trend from the past few months is starting to lose steam across the board."

However, the new orders index nudged down to 39 from 39.1, the second-lowest reading since the COVID-19 pandemic was cementing its grip on the world.

Central banks have aggressively raised interest rates to rein in steep inflation but are likely at or nearing the end of tightening cycles as they await the feed-through and look to cushion the blow to their economies from sluggish global demand.

"We are now in a better position than many had anticipated given how high-interest rates have risen and how quickly. But it is very uneven," said Craig Erlam at OANDA.

"It gives the European Central Bank pause for thought as they don't want to do too little on the inflation front but they also don't want to kill the economy."

The cost of production contracted for a sixth month and factories again passed some of these savings onto consumers, likely welcome news to policymakers at the European Central Bank who have so far failed to get inflation back to target.

They are expected to pause interest rate increases this month, according to a narrow majority of economists polled by Reuters, but will hike once more this year, taking the deposit rate to 4%.

Germany's manufacturing sector, which accounts for about a fifth of its economy, remained mired in a downturn on weak demand and rapidly falling output. In France, manufacturing contracted for the seventh month in a row.

In Britain, outside the European Union, factories suffered their weakest month since early in the COVID-19 crisis, with orders shrinking dramatically due to rising interest rates at home and abroad.

Mixed bag

China's private Caixin/S&P Global manufacturing PMI rose to 51 in August from 49.2, beating analysts' forecasts and exceeding the 50 threshold.

The reading came a day after an official survey showed manufacturing activity contracted for a fifth month, offering a mixed picture of business conditions in the world's second-largest economy.

While the rebound in China's factory conditions could be a sign that official efforts to revive growth are starting to have some effect, manufacturing activity in most of Asia remained stagnant.

In Japan it shrank for a third straight month, while South Korea extended its longest-ever slump on wage pressures and soft exports, the surveys showed.

"It's unlikely we'll see a sharp, quick rebound in China's economy. With the outlook for advanced economies also uncertain, it's hard for Asian companies to be optimistic about the outlook," said Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute.

"Stubborn food inflation is also hurting consumption in some Asian countries. The region's economy could be at a standstill."

Asia has been among the few bright spots in the global economy, though persistent weakness in China clouds the outlook.

In revised forecasts issued in July, the International Monetary Fund (IMF) projects emerging Asia's economic growth will accelerate to 5.3% this year from 4.5% in 2022. It expects China's economy to expand 5.2% this year after a 3% increase in 2022.

Japan's final au Jibun Bank manufacturing PMI came in at 49.6 in August, unchanged from July and staying below breakeven for a third month, as input costs rose.

South Korea's PMI fell to 48.9 from 49.4, marking the 14th month of contraction on weak export orders.

Factory activity also contracted in Taiwan, Malaysia and the Philippines last month. India, by contrast, saw growth accelerate at the fastest pace in three months, driven by a strong expansion of new orders and output.