Decline in Manufacturing PMI Reaches Eight-Month Depth in June
The Turkish manufacturing sector faced a challenging environment in June 2025, according to the Istanbul Chamber of Industry (IŞO) Manufacturing PMI. The PMI fell to 46.7, down from 47.2 in May, marking the lowest reading in eight months and signaling continued contraction since any figure below 50 denotes shrinking activity.
Key points about the sector's status in June 2025 include:
1. **Demand weakness is prominent**: Both domestic and export new orders declined. The new orders sub-index dropped to 46, while new export orders fell sharply to 45.5, the steepest fall in three months. This contraction in new orders has persisted for 24 consecutive months, highlighting an ongoing demand slump.
2. **Production scaled back sharply**: The output sub-index plunged to 44.4, the largest drop since October 2024. Manufacturing firms reduced output markedly in response to weak demand.
3. **Employment contracted at the fastest rate in nine months**: Reflecting companies cutting staff amid production slowdowns and reduced business activity, the employment sub-index dropped to 46.7, the largest decline since September 2024.
4. **Purchasing activity also declined significantly**: A sign of cautious inventory and input management by manufacturers facing demand uncertainty, the purchasing managers' index (PMI) for purchasing activity dropped to 44.9, the lowest level since October 2024.
5. **Input cost inflation ticked higher**: Due to currency weakness and inflationary pressures, the rate of input cost inflation ticked higher in June. However, firms raised their output prices at a slower pace given muted customer demand.
Andrew Harker, economics director at S&P Global Market Intelligence, commented that the struggles for Turkish manufacturing firms continued in June, with the latest PMI data pointing to an increasingly challenging demand environment. Harker added that the latest PMI reading completes a difficult first half of the year, with hopes that better will come over the second half of 2025.
The Turkish manufacturing sector is grappling with deteriorating demand conditions that have persisted for two years, causing firms to contract operations and employment. The sector is expected to face a tough near-term outlook, but there is cautious optimism that conditions might improve in the second half of 2025.
In light of the challenging demand environment, the Turkish manufacturing industry witnessed a decline in both domestic and export orders, leading to a contraction in new orders for the 24th consecutive month. The finance sector may also be affected as firms within the manufacturing industry are scaling back operations, thereby reducing employment and purchasing activity, and managing inventories more cautiously, reflecting the demand uncertainty.
