Turkey: Manufacturing shrinks after ten months – All production costs increase for consumers

Turkish manufacturing shrank for the first time in ten months in March as production and new orders slowed as companies reduced purchasing power in Ukraine’s precarious war environment, according to a survey.

The manufacturing PMI fell to 49.4 from 50.4, according to the committee from the Istanbul Chamber of Industry and S&P Global, falling behind the 50-point mark that separates growth from contraction.

The war was the main factor in the sluggish demand of domestic consumers, although new businesses from abroad continued to expand.

The cost of inputs remained high due to higher raw material prices, while the rise in production cost inflation was one of the sharpest on record as companies passed on rising production costs to consumers, the survey found.

The pace of job creation slowed, falling to a record low after a 22-month small but steady increase in employment, while companies noted the extension of supplier delivery times due to difficulties in obtaining materials.

“The Russian invasion of Ukraine adds a further challenge to what Turkish manufacturers are currently facing,” said Andrew Harker, chief financial officer of S&P Global.

“The already fragile demand has been further weakened by the uncertainty caused by the war, while inflationary pressures have worsened and supply chains have been further disrupted.”