Turkiye’s manufacturing sector showed tentative signs of stabilization in December, as the latest business survey indicated the pace of contraction slowed to its weakest in eight months. The seasonally adjusted Purchasing Managers’ Index (PMI) climbed to 49.1 from 48.3 in November, edging closer to the 50.0 threshold that separates expansion from contraction. This modest uptick, reported by the Istanbul Chamber of Industry in collaboration with S&P Global, signals that the sector may be transitioning away from a sustained downturn toward a more balanced footing in the early months of 2025.
The December PMI data offer a glimmer of optimism for Turkiye’s factory sector, suggesting that while conditions continued to deteriorate, the rate of decline was marginal and accompanied by indications of improvement across multiple indicators. In a market environment where macroeconomic pressures have previously constrained activity, such signs of stabilization are especially significant for manufacturers seeking to resume growth momentum. In this context, the survey’s authors highlighted that the latest readings point to a softer moderation in production, a key variable closely watched by policymakers, business leaders, and suppliers alike.
The data imply that production fell at the slowest pace in nine months, a development that could reflect improving demand dynamics or more efficient production processes taking root after a period of weakness. The softer drop in output suggests that some producers managed to sustain volumes despite headwinds, which is a positive signal for the broader industrial economy. At the same time, new orders and purchasing eased at a slower rate than in prior months, even as demand remained subdued overall. This combination—slower declines in both production and orders—points to underlying stabilization rather than a return to rapid growth, but it leaves room for cautious optimism as the new year unfolds.
Andrew Harker, Economics Director at S&P Global Market Intelligence, commented on the December PMI data, emphasizing that the survey offers “plenty of hope for the sector in 2025.” He noted that although business conditions continued to moderate, the slowdown was marginal and accompanied by signs of improvement across a wide array of variables captured in the survey. He underscored that the moment could be built upon if early-2025 demand momentum is sustained, suggesting that the sector’s path toward recovery depends on sustaining the current trajectory rather than relying on a single positive data point.
In examining what lies behind these mixed signals, the survey highlights a softer moderation in production compared with recent months, with production decreasing at the slowest pace in nine months. This observation implies that demand conditions, while still subdued, have shown some improvement or that production efficiency improvements have helped offset weaker demand. The rate of slowdown in new orders and purchasing also eased, reinforcing the view that the combined effects of demand and supply constraints are less intense than in the immediate prior period. Nonetheless, the underlying demand remains weak, and the improvements observed are fragile rather than robust, requiring careful monitoring as manufacturers adjust to a shifting macroeconomic environment.
Looking ahead, Harker cautioned that sustaining momentum into 2025 is essential for a return to growth. He pointed to the prospect of a more benign inflationary environment than in recent years as a potential enabler for the sector’s revival. If inflation cools further and households and firms feel more confident about future price paths, both consumer demand and business investment could receive a much-needed lift. This, in turn, would bolster output, orders, and investment in equipment and technology, helping to translate the December improvements into sustained gains across the manufacturing landscape. The adviser added that the current trajectory, if continued, could create a foundation for a more favorable environment for Turkish manufacturers in the months ahead.
Despite the positive signals, December’s PMI also reveals ongoing challenges that temper the pace of improvement. The survey shows that employment within the manufacturing sector experienced a renewed decline, reversing a rise observed in November. This pattern points to continued labor market fragility in the sector, potentially reflecting a combination of cost pressures, productivity concerns, and cautious hiring in the face of uncertain demand. While production and orders edged higher in terms of relative stability, firms remained cautious about expanding their workforce as they navigated inflation and input cost pressures, choosing to optimize efficiency and manage headcount rather than commit to sizable employment increases.
Input costs were another area of concern, rising sharply in December due to higher raw material prices. This uptick in cost pressures remained a critical challenge for manufacturers, squeezing margins as firms sought to preserve competitiveness through pricing strategies. However, the data also indicate a notable relief on selling prices, as output price inflation slowed to its weakest rate in more than five years. This deceleration suggests suppliers and manufacturers were employing discounts or promotions to stimulate demand and move inventories, a tactic aimed at sustaining volumes in an environment of price sensitivity. The combination of rising input costs with a more tempered output prices picture creates a complex cost dynamics landscape for Turkish manufacturers going into 2025.
This broader cost and pricing environment has important implications for firms across Turkish industry. As input costs continued to climb, companies had to decide whether to pass price increases on to consumers, absorb the costs, or pursue efficiency gains to protect margins. The deceleration of output price inflation—despite higher raw material costs—signals that firms are leveraging competitive pricing strategies, supplier negotiations, and potentially more favorable exchange rate dynamics to maintain demand. In the face of subdued demand, discounting and promotional pricing could support sales volumes, even as firms navigate tighter profit margins.
The December PMI results underscore a narrative of tentative stabilization rather than a robust recovery within Turkiye’s manufacturing sector. The index’s move toward 50.0 is interpreted by researchers and market observers as a potential inflection point, but it must be read with caution. If the momentum observed in December can be sustained into January and February, the sector could transition from a fragile stabilization to a more confident expansion. The prospect of a less challenging inflation environment could be a critical driver of this shift, enabling households to spend more freely and encouraging firms to invest in capacity and productivity improvements. The sector’s performance in early 2025 will be closely watched as a barometer of Turkiye’s broader economic health, given manufacturing’s central role in employment, exports, and supply chain resilience.
Below, a detailed examination of the key components driving the December PMI results, their implications for the sector, and the potential trajectories for 2025, with a focus on production, demand, employment, costs, and pricing dynamics.
Overview and Context
The December PMI reading of 49.1 marks a notable shift in Turkiye’s manufacturing narrative. After eight straight months of contraction, the sector’s pace of decline slowed, signaling a potential rebalancing of demand and supply conditions. The threshold of 50.0 remains the critical line distinguishing growth from contraction; a reading below 50.0 confirms contraction, while a reading above would indicate expansion. The upgrade from 48.3 in November to 49.1 in December represents more than a numerical change—it signals a change in momentum that economists will watch for sustainability in the early part of 2025. In practical terms, this momentum suggests that manufacturers experienced a softer downturn, a situation that could improve pricing power, inventory management, and investment sentiment as the year advances.
The survey, conducted by the Istanbul Chamber of Industry in partnership with S&P Global Market Intelligence, reflects a broad assessment of conditions across Turkey’s manufacturing base. The index aggregates data on production, new orders, employment, supplier deliveries, and input and output price dynamics. The December readings imply that production and orders have become less decelerated, and that input costs remain elevated but less volatile on the price side, thanks in part to strategic pricing adjustments and promotional activity. Taken together, these components present a composite picture of a sector that is navigating headwinds but showing signs of resilience and stabilization, particularly as inflation dynamics evolve and consumer sentiment stabilizes.
From a sectoral perspective, industry leaders recognize the importance of stabilization as a precursor to growth. For many manufacturers, stabilization creates space to implement efficiency gains, invest in automation, and renegotiate supplier terms to offset rising input costs. The December PMI’s softer decline could also reflect adaptation to the post-pandemic supply chain recalibrations, currency dynamics, and a shift in consumer demand toward durable goods and capital equipment in some segments. The broader macroeconomic climate in Turkiye—including monetary policy, exchange rate movements, and inflation trajectories—will influence how these manufacturing signals translate into real-world growth in production, investment, and job creation in the months ahead.
In interpreting the December results, analysts emphasize that while the sector is not yet on a clear path to expansion, the momentum toward stabilization is meaningful. A sequence of data points showing weaker declines in production and orders indicates that demand conditions may be coalescing around a more persistent, albeit gradual, improvement. The potential catalyst for further movement toward growth remains the inflation narrative—a more benign inflation environment would reduce input cost volatility, improve consumer purchasing power, and encourage firms to commit to longer-term planning. The December PMI provides the first clear signal in months that such a favorable macroeconomic backdrop could become a practical tailwind for Turkish manufacturers in 2025.
Demand Trends and Production Dynamics
One of the central themes of the December PMI is the soft moderation in production, which eased to its slowest pace in nine months. This is a crucial distinction from earlier months when output declines were more pronounced, reflecting the sector’s capacity to adapt under challenging conditions. The reduction in the depth of contraction in production suggests that some firms have found ways to maintain throughput despite subdued demand. This could be due to a combination of factors, including improved order flow from certain domestic markets, stabilization in export demand for Turkish manufactured goods, or more efficient production cycles that reduce per-unit costs even when volumes are limited.
In parallel, new orders and purchases recorded a slower rate of decline, implying that demand—while still below the break-even point of growth—has shown resilience compared with prior periods. This resilience is particularly important because it indicates that, even in a contracting environment, the pipeline of work remains active enough to sustain production capacity and avoid a deeper downturn. The balance between supply and demand in December suggests that manufacturers face a landscape where price sensitivity and cost pressures are important, but where opportunities exist to capture incremental demand as conditions stabilize. The combination of softer declines in production and orders highlights a path toward stabilization, provided that demand continues to hold firm in the near term.
Looking ahead, the December PMI data imply that if momentum can be maintained into the starting months of 2025, the Turkish manufacturing sector could return to growth. The principal caveat remains the inflation trajectory and the broader macroeconomic environment. A more favorable inflation outlook would lower the cost of inputs and improve consumer purchasing power, which in turn would support higher production volumes, stronger order inflows, and greater investment confidence among manufacturers. The potential for a self-reinforcing cycle—where improving demand supports production, which then sustains employment and investment—depends on ongoing stabilization in both price levels and economic activity.
Employment and Labor Market Signals
The December PMI presents a mixed picture for the labor market within manufacturing. While production and orders show signs of softer decline, employment contracted again in December, reversing the small uptick observed in November. This pattern indicates that while manufacturers may be maintaining production levels through efficiency and optimization, they remain cautious about expanding payrolls. The decision to restrain hiring could reflect several interrelated factors: cost pressures from higher raw material prices, uncertainty about the near-term demand environment, and the desire to preserve margins in a price-sensitive market.
Labor market dynamics in manufacturing are particularly consequential for overall macroeconomic performance. Employment levels influence household income, consumer expenditure, and social stability, all of which feed back into demand conditions for manufactured goods. The December data suggest that, at least in the short term, the sector must balance the need to grow employment with the imperative to maintain profitability during a period of elevated input costs and moderate price inflation. The path to higher employment will likely depend on how quickly the sector can translate stabilization in production and orders into sustained demand growth and improved pricing power, as well as how inflation evolves and how supportive policy measures prove to be in fostering business investment.
Costs and Pricing Pressures
Input costs rose sharply in December due to higher raw material prices, marking an ongoing challenge for manufacturers as they navigate the cost environment. The persistence of higher input costs threatens margins and may constrain the ability of firms to raise selling prices in line with cost increases, particularly in a market characterized by price-sensitive demand. However, there is a notable counterbalance in the form of output prices, whose inflation rate slowed to its weakest level in more than five years. This divergence—rising inputs, slower inflation at the production end—indicates that firms are employing pricing strategies, promotions, and discounting to maintain competitiveness and support sales volumes.
The cost dynamics observed in December have several strategic implications. For manufacturers, the priority is to optimize sourcing, negotiate favorable terms with suppliers, and pursue productivity improvements that can offset higher input costs without eroding demand. The slower pace of output price inflation provides room for tactical pricing that can stimulate demand without triggering a spiral of cost-push inflation. Firms may also explore product mix adjustments, value-added features, and service-based offerings to differentiate themselves in a market that is sensitive to price movements. The ultimate outcome will hinge on the ability of companies to manage a blend of cost containment, efficiency gains, and targeted pricing that sustains margins while protecting market share.
Production, Demand, and Supply Chain Dynamics
The December PMI’s production and demand signals highlight a nuanced landscape in which the sector demonstrates resilience even as macroeconomic headwinds persist. The production slowdown eased to the weakest in nine months, suggesting some stabilization in manufacturing output. This trend may reflect a combination of adjustments in production schedules, better inventory management, and a gradual improvement in supplier reliability, allowing firms to operate with more stable throughput. In addition, the marginal improvement in new orders and purchasing points to a softer but persistent stream of demand that, if maintained, could underpin a cautious rekindling of output growth in early 2025.
From a supply chain perspective, December’s readings on input costs reveal ongoing cost pressures, while the slower rise in output prices indicates that manufacturers have scope to manage demand through pricing without triggering immediate inflationary escalation. This dynamic is critical for the sector as it navigates the post-pandemic recalibration of supply chains, currency fluctuations, and global demand shifts. The ability to control costs and sustain sales through strategic pricing will influence investment decisions, including potential upgrades to machinery, automation, and process improvements designed to enhance efficiency and reduce unit costs.
Regional and Sectoral Variety
Turkey’s manufacturing landscape encompasses diverse subsectors with varying sensitivities to inflation, currency movements, and demand patterns. Some subsectors may experience more pronounced stabilization while others continue to face lingering softness. The December PMI’s composite nature captures this heterogeneity, recognizing that improvements in one set of industries can help support the broader index, even if the weakest segments lag. The regional distribution of production activity—whether concentrated in major urban industrial hubs or spread across smaller manufacturing bases—also shapes the overall trajectory. As firms contemplate 2025 expansion plans, regional policy measures and local economic conditions could influence how quickly stabilization translates into growth across different parts of the country.
Outlook for 2025 and Policy Implications
The December PMI’s optimism hinges on a confluence of favorable factors. The most salient is the potential for a more benign inflationary trajectory than in recent years. If inflation cools further, it could ease the pressure on input costs and improve real disposable incomes, thereby boosting consumer demand for Turkish manufactured goods. For the sector, this would translate into stronger order inflows, more confident hiring, and a broader-based recovery in production. Policymakers and business leaders may view the December data as a signal to maintain supportive conditions for manufacturing investment, capacity expansion, and export-oriented activity, while also addressing structural issues that impede productivity growth.
To translate stabilization into durable growth, a combination of measures could be necessary. These include continuing to improve the business environment, ensuring predictable monetary and fiscal policy, stabilizing macroeconomic fundamentals, and providing targeted support to sectors with high growth potential. For manufacturers, prioritizing productivity-enhancing investments—such as automation, digitalization, and process optimization—could yield long-term gains in efficiency and competitiveness. In addition, initiatives aimed at improving supplier networks, reducing logistics bottlenecks, and expanding access to credit for SMEs could reinforce the sector’s capacity to scale up production as demand improves. The December PMI’s message is clear: the sector has begun to regain momentum, but sustained growth will require ongoing commitment to stability and strategic investment.
Methodology, Confidence, and Interpretation
The PMI is a widely recognized gauge of manufacturing activity that aggregates responses from purchasing managers across Turkey’s manufacturing sector. The December reading of 49.1 reflects a composite assessment of production levels, new orders, inventories, supplier deliveries, and employment dynamics, among other factors. The data provide timely insights into the sector’s trajectory, but they are also subject to uncertainties inherent in survey-based indicators. Analysts emphasize the importance of looking at the overall trend over a series of months rather than focusing on a single monthly number. In this context, the December PMI’s improvement from November’s reading is part of a broader pattern that could indicate stabilization if sustained. The confidence in the reading hinges on the consistency of the underlying sub-indices—production, orders, and input costs—over successive months, as well as corroborating indicators from other economic sources.
Real-world interpretation of the PMI involves translating a numerical signal into business implications. For manufacturers, a PMI below 50 signals contraction, but the closeness to the threshold—49.1 in December—suggests limited downside momentum and the possibility of reversal if conditions improve. For policymakers, the PMI provides a snapshot of the manufacturing sector’s health, informing decisions on monetary policy, stabilization measures, and support for industrial activity. For investors, the PMI can influence risk assessments, asset allocation, and expectations for Turkish economic growth.
Orders, Purchasing, and Input-Output Dynamics
In December, the rate of slowdown in new orders and purchasing eased, though demand remained subdued. This nuanced shift indicates that while orders did not surge, they did not deteriorate as rapidly as in prior months, suggesting a slow stabilization in demand dynamics. The easing of the order and purchasing decline is a key offset to the softer production drop, as it implies a continuing pipeline of work that can sustain activity into the near term. Firms observed that purchases, a leading indicator of production activity, showed some resilience, implying that manufacturing inventories could be kept at stable levels, reducing the need for abrupt restocking or rapid production ramp-ups.
The combination of steadier orders and rising input costs places manufacturers in a delicate position. Firms must balance the need to maintain production against the constraint of higher procurement costs and the challenge of pricing to preserve margins in a cautious demand environment. The December readings suggest that some firms could optimize procurement strategies, negotiate favorable supplier terms, and adjust production schedules to better align with actual demand. These actions may help mitigate the downside risks associated with a persistent demand lull while supporting a gradual recovery in output as 2025 progresses.
From a supply chain perspective, the softer moderation in orders can reflect a number of underlying factors, including stabilizing exchange rates, gradually improving global demand for Turkish goods, and sector-specific demand patterns that favor certain product categories. The extent to which these factors translate into sustained growth will depend on ongoing macroeconomic developments and the ability of Turkish manufacturers to adapt quickly to changing market conditions. As firms navigate 2025 planning cycles, the focus on procurement efficiency and demand sensing will be central to building resilience and supporting long-term competitiveness.
Price Pressures and Margin Management
Pricing dynamics in December reveal a counterintuitive pattern: while input costs rose sharply, output price inflation slowed to its weakest in over five years. This situation creates a window of opportunity for firms to employ pricing strategies that can drive sales while absorbing some of the cost pressures. The deceleration of output price inflation suggests that manufacturers are choosing not to pass through all rising costs to customers, possibly due to competition, price sensitivity, or the desire to retain market share. The ability to control pricing while managing procurement costs is critical for maintaining sustainable margins in a difficult macroeconomic environment.
For management teams, the December data emphasize the importance of disciplined cost management and strategic pricing decisions. Firms may pursue targeted promotions, volume discounts, or product bundling to incentivize demand without eroding overall profitability. Additionally, firms could explore productivity-enhancing investments that reduce unit costs and help offset higher input prices. The interplay between cost pressures and pricing power will shape profitability and investment decisions as 2025 unfolds, influencing how quickly the sector can transition from stabilization to growth.
Outlook and Strategic Implications for 2025
The December PMI’s signal of tentative stabilization invites a forward-looking assessment of the Turkish manufacturing sector’s trajectory in 2025. The most salient factor shaping the outlook is the anticipated inflation environment. A much more benign inflationary backdrop than in recent years could reduce input cost volatility, improve consumer purchasing power, and bolster demand for Turkish manufactured goods. If inflation continues to moderate, producers may experience more favorable conditions for price adjustments, investment planning, and capacity expansion, all of which contribute to a more robust recovery path.
The sector’s prospects for returning to growth hinge on a combination of demand resilience, cost containment, and policy support. As demand stabilizes, firms could increase production volumes, hire more workers, and invest in modernization to sustain competitive advantage. Such a transition would likely be gradual, requiring sustained improvement in the macroeconomic climate, continued improvement in consumer and business confidence, and a conducive environment for investment. The December PMI’s momentum could serve as a trigger for strategic planning among Turkish manufacturers, guiding decisions on capital investment, product development, and export-oriented strategies.
Policy considerations that can influence the sector’s 2025 trajectory include maintaining monetary policy that supports price stability while avoiding excessive tightening that could dampen growth. Fiscal measures aimed at supporting manufacturing investment, research and development, and export capacity could further bolster the sector’s resilience. Targeted programs to strengthen supply chains, improve logistics, and expand access to credit for smaller enterprises could also play a meaningful role in enabling a faster move toward growth, particularly for segments with high growth potential or strategic significance for export markets.
Risk Assessment and Contingency Scenarios
Several risk factors could impact the manufacturing sector’s 2025 trajectory. A renewed escalation in global energy prices or commodity shocks could reignite input cost pressures and complicate pricing strategies. A sharper-than-expected slowdown in major trade partners or a deterioration in global demand could undermine the pace of recovery in export-oriented segments. Conversely, positive developments such as a sustained decline in inflation, improved consumer sentiment, and favorable exchange rate movements could accelerate demand, allowing firms to expand capacity and hire more extensively. The interplay of these risks and opportunities will shape the sector’s resilience and the speed with which stability translates into growth.
To mitigate downside risks, manufacturers may pursue diversification of markets, both domestically and internationally, to reduce reliance on a single demand channel. Investing in automation, process optimization, and quality improvements could enhance productivity and enable firms to compete more effectively on price and reliability. By strengthening supplier networks, adopting advanced manufacturing technologies, and leveraging digital tools for demand forecasting and inventory management, Turkish manufacturers can better weather adverse conditions and position themselves for a stronger rebound when conditions improve.
Sectoral Insights and Strategic Takeaways
The December PMI offers several practical takeaways for business leaders and policymakers. First, the improvement in production and orders signals that stabilization is not a mere temporary blip but a potential step toward renewed growth, provided momentum is sustained. Second, the continuation of a difficult but improving employment picture suggests that the sector must balance cost management with strategic hiring as demand returns. Third, the inflation dynamics—rising input costs with slowing output inflation—underscore the importance of careful pricing, procurement strategies, and efficiency gains as levers for margin protection and competitiveness. Finally, the overall outlook hinges on the macroeconomic environment, particularly the inflation trajectory and consumer demand, which will shape the pace and breadth of any recovery in Turkish manufacturing.
Conclusion
In December, Turkiye’s manufacturing PMI reached 49.1, up from 48.3 in November, signaling the slowest contraction in eight months and a clearer path toward stabilization. This shift reflects a soft but meaningful improvement in production, with the rate of decline in output the slowest in nine months, and a moderated drop in new orders and purchasing. The data also reveal a cautious labor picture, with employment in manufacturing slipping again after a November uptick, underscoring ongoing sector-specific challenges amid a favorable price dynamic for consumers—a rare combination of rising input costs and decelerating output price inflation.
Andrew Harker’s observation about the December PMI data offering “plenty of hope for the sector in 2025” captures the sentiment surrounding the current moment. The prospect of a more benign inflationary environment looms as a potential catalyst for a broader revival in Turkish manufacturing, provided momentum can be sustained at the start of 2025. If demand gains continue and inflation remains under control, the sector could build on December’s progress to re-enter a growth trajectory. The December PMI’s nuanced picture—stabilizing production, easing but still-subdued demand, rising input costs, and softer output price inflation—points to a path forward that emphasizes efficiency, strategic pricing, and targeted investment.
As Turkey navigates the early stages of 2025, the manufacturing sector’s health will be a bellwether for broader economic resilience. The December PMI’s signals of stabilization, while not yet implying a broad-based recovery, suggest a readiness among Turkish manufacturers to adapt and evolve in a changing macroeconomic landscape. Stakeholders across business, policy, and finance will be watching carefully for the next series of PMI releases to confirm whether December’s momentum can be sustained and translated into a durable expansion. The road ahead remains contingent on inflation dynamics, demand conditions, and policy support, but the December results provide a substantive basis for cautious optimism about the near-term prospects of Turkiye’s manufacturing sector.
