The recovery in Turkey’s manufacturing sector continued in September, a survey showed on Thursday, with increasing new orders and output encouraging firms to hire more staff.
The headline Purchasing Managers' Index (PMI) for the manufacturing sector stood at 52.8 in September, according to survey data from the Istanbul Chamber of Industry (ISO) and London-based global data firm IHS Markit, remaining above the 50 mark that separates expansion from contraction.
The figure was down from 54.3 in August, according to the survey. By remaining above 50.0 or the no-change level, the PMI indicated that the recovery from the downturn caused by the coronavirus pandemic has continued for the fourth consecutive month.
The PMI for the manufacturing sector is seen as an important gauge in tracking the health of the sector.
The rate of job creation accelerated to the fastest in more than two years, the panel said, as firms received new orders amid a recovery in demand after the peak of the coronavirus outbreak.
Beginning in March, Ankara shut schools and businesses, including many factories, closed borders and adopted weekend stay-home orders. Much of the economy was reopened in June as most of the lockdown measures were lifted.
"This expansion in capacity, allied with slower new business growth, enabled firms to reduce backlogs of work," read the report.
Input cost and output price inflation increased due to the weakness of the Turkish lira, it said, although some firms have said lira moves lifted their competitiveness in export markets.
"The key highlight from the latest PMI survey was strengthening job creation. A sustained period of improving demand means that manufacturers are willing to invest in rebuilding workforces following the COVID-19 downturn," said Andrew Harker, economics director at IHS Markit.
"The rates of expansion in new orders and output have leveled off and the threat of the pandemic remains. Firms will be hoping that trends remain positive over the Q4 to keep the recovery going."
Eurozone factory recovery
The recovery in eurozone manufacturing activity also gathered pace last month but was largely driven by strength in powerhouse Germany. However, rising coronavirus cases across the region may yet reverse the upturn, a survey showed.
While the manufacturing sector is enjoying something of a revival, most market watchers and policymakers will focus on a survey for the bloc's dominant service industry, which accounts for around two-thirds of GDP, due on Monday.
Its preliminary reading returned to contraction territory last month, suggesting renewed coronavirus-led lockdown restrictions were having an impact.
"If you look across the region, the fact is large numbers of services firms may no longer be viable in a world where we have a significant amount of COVID-19 restrictions in place and that means there could be a big employment shakeout," said Peter Dixon of Commerzbank.
As the pandemic raged across Europe, governments imposed tough lockdowns. But as infection rates fell, many of those controls were removed. However, a resurgence in cases has meant some restrictions have now been reimposed.
That resurgence is the biggest threat to the recovering eurozone economy, according to a Reuters poll of economists last month, who said growth and inflation are more likely to create negative surprises over the coming year than positive ones.
"Second-wave effects carry a lot of uncertainty about the growth environment though. A new round of more national lockdowns could have a serious impact on the labor market again, which is not our base case, but cannot be ruled out either," said Bert Colijn of ING.
Still, surging demand after the initial relaxation pushed IHS Markit's final Manufacturing PMI index to 53.7 in September from August's 51.7, in line with an earlier flash reading and its highest level since August 2018.
An index measuring output, which feeds into the composite PMI due on Monday and is seen as a good guide to economic health, bounced to its highest since February 2018.
Earlier figures showed factory output in Germany, Europe's largest economy, was booming – in contrast to modest production growth in France and Spain and slightly slower growth in Italy.
Without Germany, output growth would have weakened to the lowest since June, IHS Markit said.
Growth also slowed in Britain, outside the currency union, and the pace of the bounce-back is expected to weaken further in the coming months as the government scales back its job subsidies and seeks to clamp down on rising COVID-19 cases.
But with overall demand at a 2-1/2-year high, eurozone factories built up a backlog of work. Meanwhile, optimism about the coming 12 months climbed to a level not seen since before the U.S.-China trade war escalation in early 2018.