DOMESTIC PMI SURGES IN JUNE AS COVID-19 RESTRICTIONS CONTINUE TO EASE
The Purchasing Managers’ Index (PMI) for Turkish manufacturing in June passed the 50 mark that separates expansion from contraction, while a slump in manufacturing across Europe and Asia also showed signs of easing
TURKISH manufacturing activity increased in June for the first time since February, as restrictions to curb the spread of the coronavirus were eased, a closely followed survey showed yesterday. The Purchasing Managers’ Index (PMI) for manufacturing rose to 53.9 last month from 40.9 in May, ending a three-month period of moderation, according to survey data from the Istanbul Chamber of Industry (ISO) and London-based global data firm IHS Markit, passing above the 50 mark that separates expansion from contraction.
ON the other hand, a slump in the global manufacturing also showed signs of easing in June as a rebound in China’s activity offered some hope Asia may have passed the worst of the devastation caused by the pandemic, while the collapse in European factory activity abated.
But sluggish global demand and fears of a second wave of infections will tame any optimism on the outlook and keep the pressure on policymakers to support their ailing economies.
Globally, the pandemic has infected more than 10 million people and killed more than 500,000. A resurgence in new cases in several countries has prompted some governments to backpedal on plans to reopen their economies and fueled concerns the worst is still to come.
In its latest projections, the International Monetary Fund (IMF) expected the global economy to shrink 4.9% this year and rebound just 5.4% next year.
“A return to near-normality amid the lifting of COVID-19 restrictions enabled manufacturers to expand their production volumes at a marked pace during June,” read the report on Turkey.
The June figure was the highest since February 2018, Industry and Technology Minister Mustafa Varank said, evaluating the data. “We have left behind other countries as evident from June’s figures,” Varank said on Twitter.
He underlined that the manufacturing industry was gaining momentum in the transition to the “new normal.”
Output, new orders and employment all increased, while rises in input costs and output prices were also recorded.
Production volumes expanded markedly as Turkey took steps to lift most pandemic restrictions, while new orders also returned to growth.
Higher output requirements led to increases in employment and purchasing, while delivery times lengthened to one of the greatest extents in the survey’s history, underlining disruptions to the supply chain. Currency weakness contributed to a further sharp monthly rise in input costs, which were passed on to customers as increased selling prices, respondents said, while output charges rose at the fastest pace in three months.
“The recovery in the Turkish manufacturing sector gathered momentum in June, with a number of the variables from the survey back in expansion mode,” said Andrew Harker, economics director at IHS Markit. “The severity of the COVID-19 downturn was such, however, that much more will be needed in coming months to recover the output lost during the worst of the pandemic. We would hope therefore to see growth strengthen further in the months ahead.”
GLOBAL MANUFACTURING SLUMP EASES
Series of business surveys released yesterday showed broad improvements in manufacturing across Europe and Asia in June from depths hit in April and May. Activity in some economies swung to growth while declines in other places slowed.
“No intermission, no glass of bubbly, just straight into the second half of 2020. And the outlook? Better than the first half, but not as good as it could be,” said Robert Carnell at ING.
The downturn in eurozone manufacturing was not as bad as initially thought last month after more economies in the bloc eased restrictions imposed to quell the spread of the coronavirus, a survey showed.
With transmission rates of the virus falling in much of Europe, and economies opening up, IHS Markit’s final eurozone PMI moved closer to the 50-mark separating growth from contraction in June.
It rose to 47.4 last month, up from May’s 39.4 and comfortably ahead of an earlier flash reading of 46.9. An index measuring output jumped to 48.9 from 35.6.
Germany’s manufacturing sector also contracted at a slower pace as Europe’s largest economy lifted restrictions. Its economy will gradually recover and is likely to return to last year’s level at the end of 2021, economic institute Ifo said yesterday.
French factory activity bounced back to modest growth and in Britain, outside the currency union, the historic collapse eased further as companies reported a small increase in output.
Activity in the U.S. almost flatlined, later data is expected to show.
But global stocks struggled for momentum yesterday as the improving economic data was offset by concern surging coronavirus cases in the U.S. could derail the world’s recovery before it properly begins.
In China, factory activity grew at a faster clip in June after the world’s secondlargest economy lifted coronavirus lockdown measures, the Caixin/Markit PMI showed.
Manufacturing activity also expanded in Vietnam and Malaysia, pointing to a slow but steady recovery ahead. India’s manufacturing activity contracted for a third straight month in June but at a much slower pace, as both output and new orders shrank at softer rates.
Similarly, the export powerhouses of Japan and South Korea continued to see manufacturing activity decline, albeit at a softer pace.
China’s Caixin/Markit PMI rose to 51.2 in June from 50.7 in May, marking the highest reading since December 2019. That followed a similarly upbeat reading from the Chinese government’s own PMI on Tuesday.
Vietnam and Malaysia also saw their PMIs crawl back above the 50-mark, a welcome sign for policymakers struggling to combat the pandemic’s fallout.
“The host of PMI data release this morning offers some reassuring signs the outlook for the crucial manufacturing sector continues to be on the mend,” said Wellian Wiranto, an economist at OCBC Bank.
But analysts expect any recovery in the region to be slow.
While China’s export orders shrank at a slower pace, its employment contraction worsened, the PMI showed, underscoring the fragile recovery.
“Overall manufacturing demand recovered at a fast clip, but overseas demand remained a drag,” said Wang Zhe, senior economist at Caixin Insight Group.
Japan’s PMI rose to a seasonally adjusted 40.1 in June, while South Korea’s PMI ticked up to 43.4 - both remaining far below the rise-or-fall threshold of 50.
Separately, a Bank of Japan survey showed big manufacturers’ confidence sinking to levels last seen during the 2009 global financial crisis, reinforcing expectations the country was sinking deeper into recession.
“If demand doesn’t rebound fast enough, companies will have to shed jobs,” said Shinichiro Kobayashi, senior economist at Mitsubishi UFJ Research and Consulting. “That will delay Japan’s economic recovery, which could end up in a L-shape.”