According to the data announced by the Istanbul Chamber of Industry (ISO) and IHS Markit; Manufacturing PMI declined from 53.9 to 51.4 in November. The manufacturing PMI index, which was 33.4 in April due to the economic recession caused by Covid-19, recovered in the following months and had a growth position as of June. In the period of economic normalization, although the manufacturing sector activity continues to recover, the sector acceleration has slowed down due to the demand and activity risks caused by the Covid epidemic, volatility in exchange rates and fragile external demand.
If we look at the details of the PMI data; production and new orders slowed. Strong employment growth continued. Serious disruptions occurred in supply chains. The second wave of the Covid-19 pandemic explains the decline in production and orders. In this context, high case increases at home and abroad pose a downside risk in terms of production levels and general economic activity. It should also be remembered that domestic demand will be limited by tightening financial conditions. The global impact of the epidemic also causes negativity in supply chains, causing a slowdown in shipping and distribution. During this period, employment levels were preserved largely thanks to the company incentives provided and the manufacturing sector continued to keep its activity high.
The manufacturing sector continues to remain in the growth zone. The Covid outbreak and new restrictions will pose a downside risk to economic growth in the last quarter. The conditions will particularly harm service sector activity and employment. Like the world shutdowns, the contraction is felt by the service sector first. We will see if this will reflect on the production side. However, at this stage, Covid measures are tried to be taken at a level supply and production processes not to be affected. Production costs were also in an upward trend due to the increase in exchange rates, but the inflationary effects may be limited as the expectation for the exchange rate to stabilize by November. The reflection of this on final goods prices will take place during the replenishment phase.
