Turkey Says Depreciating Lire Cause of Further PMI Slump

Turkey’s manufacturing, which represents around a third of the country’s economy, slipped further into contraction in December, falling to its lowest level in four months, a survey showed on Monday.

The manufacturing purchasing managers’ index slipped to 47.7 in December from 48.8 in November, according to the Istanbul Chamber of Industry and HIS Markit. Anything below 50 indicates contraction; anything above, expansion, Reuters reported.

“The Turkish PMI remained below 50.0 in December, mainly reflecting the output and new orders components,” Markit senior economist Trevor Balchin said. “More positively, employment grew further during the month. The depreciating lira was again responsible for an intensification of cost pressures, with input price inflation accelerating further after a relatively moderate trend in the third quarter.”

The depreciation of the lira continued to put upward pressure on manufacturing input prices in December, with inflation continuing its upward trend, Markit said. As a result, output prices charged by manufacturers also rose at a higher rate, compared with the previous period.

The lira has hit a series of record lows this year, hurt by widening domestic concerns, particularly over security and a government crackdown following the failed coup in July. The lira lost around 20% of its value against the dollar in 2016.

Turkish businesspeople forecast that the troubles of 2016 will not recur in 2017. The members of the business world agree that the economic measures taken in 2016 will yield impacts this year.

Meanwhile, Turkey’s year-on-year trade deficit fell by 11.1% in December 2016 to $5.56 billion, according to preliminary data released by the customs and trade ministry on Monday.

Exports for the month rose to $12.82 billion, which is a 9.31% increase from December 2016, according to a preliminary estimate from the ministry. Imports also increased by 2.2% to $18.38 billion.

Overall exports in 2016 slipped by just 0.84% to $142.6 billion from $143.8 billion in 2015 while imports fell by 4.17% to $198.6 billion from $207.23 billion in 2015, according to the data.

Trade deficit for the year was $55.97 billion, down 11.74% compared to $63.41 billion in 2015.

In November 2016, exports rose to $12.85 billion, a 9.92% increase from November 2015, while imports increased by 6.25% to $16.96 billion.