Turkish PMI Falls to 47.1 Points in June

The Turkish manufacturing sector suffered a significant setback at the end of the first half of the year. The growing impact of the Middle East conflict weighed heavily on both domestic demand and international supply chains. This is evident from data released on July 1 by the Istanbul Chamber of Industry and Commerce and S&P Global.

The Purchasing Managers’ Index (PMI) for the manufacturing sector fell to 47.1 points in June, down from 49.8 points in May.

This figure is well below the 50-point growth threshold and signals a deterioration in business conditions in Turkish industry for the 27th consecutive month. The sharp decline ended the slight stabilization seen in May and points to ongoing structural pressures resulting from the regional conflict.

Middle East Conflict Weighs on Demand and Supply Chains

The survey paints a picture of an industrial sector suffering from increasing geopolitical uncertainty and weak demand. While production had risen slightly in May, it fell sharply again in June.

In particular, the sharp decline in new orders weighed on performance. Export activity also deteriorated again after a brief period of growth in May.

Many companies cited the uncertainty resulting from the Middle East conflict, as well as persistently high price levels, as the main reasons for their customers’ reluctance to buy.

In addition, supply chain problems intensified. The conflict disrupted key transportation routes, causing suppliers’ delivery times to lengthen once again. However, the delay was the shortest it had been since February.

Inflationary Pressure Eases Slightly

For the Turkish central bank, there was at least one small ray of hope: inflationary pressure eased somewhat in June. Both purchase prices and selling prices rose at the slowest pace since the end of last year.

Inflation in purchase prices fell to its lowest level since November, after reaching its most recent peak in April. S&P Global emphasized, however, that costs continued to rise significantly—particularly due to higher oil prices and rising raw material costs resulting from the war.

Selling-price inflation also slowed, reaching its lowest level so far this year. This suggests that manufacturers are increasingly unable to pass on higher costs in full to their customers.

Companies Are Reducing Staff and Inventory

Faced with declining order intake and high production costs, many companies reduced their capacity to protect their margins.

Employment declined for the 19th consecutive month. Companies attributed this to both natural turnover and targeted cost-cutting measures.

At the same time, inventories of raw materials and finished goods were significantly reduced. Due to weak demand, many manufacturers refrained from building up larger stockpiles.

S&P: Hope for a Turn for the Better

“After the Turkish manufacturing sector showed initial signs of recovery in May, it suffered another setback in June,” explained Andrew Harker, Economics Director at S&P Global Market Intelligence.

According to feedback from the surveyed companies, the war in the Middle East remains the most significant drag on the industry. Should geopolitical tensions continue to ease in the coming months, this could also have a positive impact on business performance.