Turkish manufacturing activity contracted for the fourth consecutive month in June and dropped to the lowest level in two years, as weakening demand prompted companies to curb production, a business survey showed on Friday.

The Purchasing Managers’ Index (PMI) for manufacturing stood at 48.1 in June, down from 49.2 in May, according to the survey by the Istanbul Chamber of Industry (ISO) and S&P Global, dropping further below the 50-point line that marks a contraction in activity.

The reading marked the lowest level since May 2020 when measures in face of the coronavirus pandemic largely skirted the manufacturing sector.

The survey pointed to a challenging demand environment in Turkey, the panel said, adding that output and purchasing activity eased, while input cost and output price inflation remained sharp.

Price rise and challenging economic conditions contributed to weaker demand, causing a softening in both new orders and output, the panel said.

Companies continued to expand their workforces, although the rate of job creation was the second-lowest in 25 consecutive months of rising workforce numbers, it said.

Input costs and output prices rose more quickly than the series averages, indicating steep inflationary pressures, the panel said. Companies attributed the rising input prices to the higher cost of raw materials, which in turn led to their raising sale prices sharply.

"Turkish manufacturers are facing a challenging market environment at present, with price rises and demand weakness combining to lead to softer new orders and a scaling back of production," said Andrew Harker, economics director at S&P Global Market Intelligence.

"Increases in employment were again the main positive, although even here the rate of job creation was among the softest in the past two years. The months ahead seem likely to continue to prove challenging for firms," he said.