According to the data announced by the Istanbul Chamber of Industry (ISO) and IHS Markit; Manufacturing PMI rose from 49.3 to 51.3 in June. It is observed that the manufacturing sector, which entered the contraction zone after the closing effect in May, regained a growth position above the threshold value as of June. In terms of economic activity, we see that the PMI data, which makes the most important inference, reflects the pandemic conditions and the related opening and closing actions through periodic changes.
If we look at the details of the PMI data; production and new orders resumed growth. While international orders have been at their highest acceleration since January due to the improvement in foreign demand, although the situation in the domestic market has shown a better outlook with the opening, it is seen that the momentum gain is not at the level of developed countries in general. While exports are strong, domestic demand is more limited due to the conditions of the economy and the market, and we can expect this to be more limited with the BRSA decisions taken today. Especially after July, the picture regarding this situation will emerge a little more clearly. In addition to the fact that interest rates in Turkey do not tend to decrease due to high inflation, the rate of increase in expenditures will also slow down.
While it is stated that supply cuts continue; Sales prices also saw the sharpest increase since September 2018. The continuation of the bottleneck in supply causes companies to sell more from stock, so inventories tend to fall. Input prices are experiencing the biggest increase since 2018. Both the depreciation of TRY and the increase in raw material prices, especially in the metal group, are the main reasons for this. As production costs increase, it is inevitable that this will be reflected in prices. The PPI and CPI spread is above 20 points compared to the current May inflation, and we expect the upward trend in PPI to continue in the future developments in inflation. Therefore, there will be a reflection in terms of CPI and we will not see a decrease in inflation supported by its main indicators. There is much evidence for this.
We will see that the effects of the 15% hike in electricity and 12% in natural gas prices will be reflected on the inflation after July. The effects of this are not only on the relevant final consumption item; Since it is included as an input in all groups from industry to service, it will cause an increase in general costs. In general, we estimate that a diffusion effect will create an increase with indirect effects of around 1 to 1.2 percentage points on inflation. In the base scenario, market-based expectations can be revised upwards for inflation, which is expected to remain close to current levels until the base effect, which may take effect in the September – October period. Regarding the general outlook of inflation, the risk balance increases its weight upwards.
While the Manufacturing PMI rose to 51.3, it appears to have registered a slow increase from the region in May compared to the projected growth for June. In June, the largest marginal impact of the return from the severe May shutdown is for the services sector. We can expect service activity to catch up with manufacturing activity as seen in the global PMI data. While the effects of both the opening of businesses or the expansion of the activity time and the more spending of individuals are seen positively in terms of services and sub-sectors, it can be expected that this will also reflect as a slowdown in manufacturing activity. However, the limitation effect will increase with the current or future situations in domestic demand conditions. Whereas; foreign demand and tourism seem more positive.
Kaynak
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı