The decline in economic activity in many European countries was the main factor leading to a weaker export climate. Output in Germany, the United Kingdom, Italy, France and Spain all recorded declines in August. In the US, the second largest export market for Turkish manufacturers, production growth continued in the middle of the third quarter. Economic activity in the United Arab Emirates, Saudi Arabia and Qatar continued to expand strongly in August. Economic activity also increased in all BRIC economies.
The results of the Istanbul Chamber of Industry (ISO) Türkiye Manufacturing Sector Export Climate Index, which measures the operating conditions of the Turkish manufacturing sector in its main export markets, were announced for August 2023. All figures measured above the threshold value of 50.0 in the index indicate an improvement in the export climate, while values below 50 indicate deterioration.
Istanbul Chamber of Industry Türkiye Manufacturing Sector Export Climate Index, which was 50.3 in July, declined to 49.1 in August, below the threshold value of 50.0. Thus, the index signaled a slight deterioration in the demand climate of Turkish manufacturing exporters for the first time in seven months. The decline in economic activity in many European countries was the main factor leading to a weakening in the export climate.
Production fell in five of the six top export destinations
In August, production in Germany, the United Kingdom, Italy, France and Spain, five of the six countries to which Turkish manufacturing industry products are exported the most, declined. The decline in Germany was significant and at the highest rate since May 2020.
Declines also accelerated in France and Italy, while the UK and Spain switched from growth to contraction. In the US, the second largest export market for Turkish manufacturers with a 7 percent share in exports, production growth continued in the middle of the third quarter. However, the increase was very moderate and the lowest in the last six months.
UAE, Saudi Arabia and Qatar continue to grow strongly
Some parts of the Middle East showed more positive trends compared to Europe. Economic activity in the United Arab Emirates, Saudi Arabia and Qatar continued to grow strongly in August. Elsewhere in the region, output declined in Egypt and Lebanon. India was one of the driving forces of growth in August as well. However, the impact of this country, whose share in Türkiye's manufacturing exports is only 0.5 percent, on the overall export climate was limited. Economic activity increased in all BRIC economies, with growth in Russia hitting a five-month high. The sharpest decline in output in the latest survey period was in the Czech Republic, which has been affected by the difficulties in Europe's manufacturing sector. Manufacturing output in Poland and Austria also recorded significant declines. Commenting on the Istanbul Chamber of Industry Türkiye Export Climate Index, Andrew Harker, Economic Director at S&P Global Market Intelligence, said: "The concerns we expressed last month that the export environment for Turkish manufacturers could weaken appear to have materialized in August. Europe was again the main source of weakness, while the US was able to achieve very limited growth. Therefore, with exceptions such as the United Arab Emirates and to a lesser extent Russia, the contribution to growth from main export markets remains quite low." You can access the full Istanbul Chamber of Industry Türkiye Export Climate Index August 2023 reports in the attached files.