Türkiye’s manufacturing sector showed continued signs of strain in July 2025, as the country’s Purchasing Managers’ Index (PMI) dropped further, extending a prolonged period of deterioration in industrial activity. According to the Istanbul Chamber of Industry (ISO), Türkiye’s Manufacturing PMI declined to 45.9 in July, reinforcing the indication of contraction for the 16th consecutive month.
In PMI measurements, any figure above 50 indicates improvement, while values below 50 signal contraction. With this latest reading, the Turkish manufacturing sector has entered one of its longest and steepest slowdowns since late 2024.
Declining New Orders and Weakened Domestic Demand
The most significant takeaway from the July survey was the sustained weakness in customer demand. New orders declined for the 25th straight month, and the pace of decline in July was the sharpest since March 2025. Both domestic and international demand remained muted, with new export orders also continuing to contract.
Manufacturers cited stagnant market conditions and client hesitancy as key reasons for the drop in orders. As a result, production volumes fell at the fastest rate recorded in the past ten months.
Production and Employment Trends Show Mounting Pressure
The July data revealed that output reductions have accelerated, causing further contraction in employment across most sectors. Many manufacturers have attempted to reduce inventory levels due to the lack of new business inflows. Input stocks experienced their sharpest decline since October 2024, while finished goods inventories also decreased significantly after a brief uptick in June.
Firms also reported a marked decline in purchasing activity, a clear reflection of the grim demand outlook. Employment levels either fell or remained flat in nine out of the ten monitored sub-sectors, with only the food sector showing an increase. This marked the weakest employment performance in ten months.
Input Costs Continue to Rise Despite Slower Inflation
While global commodity prices have stabilized somewhat, manufacturers in Türkiye continued to experience substantial increases in input costs during July. Respondents in the ISO PMI survey largely attributed this to the ongoing depreciation of the lira, which has pushed up the cost of imported raw materials and intermediate goods.
Despite the rise in input costs, inflation occurred at the slowest rate recorded so far in 2025. Sales price inflation quickened slightly compared to June, though some firms reduced prices in response to sluggish demand, which kept overall price growth relatively subdued.
Sector-Level Trends Highlight Imbalances Across Manufacturing
The ISO Türkiye Sectoral PMI Report for July 2025 provided deeper insight into the sectoral imbalances plaguing the manufacturing industry. All ten of the observed sub-sectors reported a loss of momentum in new orders, with only the electrical and electronics products sector managing to post an increase in output.
Even then, the growth in electrical and electronics production was modest, though noteworthy as the first expansion in 17 months. The most severe contraction occurred in the food sector, which experienced the sharpest deterioration in business activity since May 2020.
Textile Industry Continues to Suffer
Among the hardest-hit segments was the textile industry, which not only registered a decline in new orders and exports but also reported the steepest drop in employment. July marked the fifth straight month of falling final product prices in the textile sector, a clear indication of persistent deflationary pressure amid poor demand.
The sector’s woes have raised concerns over job security, investment stagnation, and a potential decline in Türkiye’s traditionally strong textile exports if the trend continues into the next quarter.
Machinery, Metal, and Paper Industries Face Challenges
The machinery and metal products segment, which had seen a modest recovery in June, returned to contraction territory in July. Meanwhile, the wood and paper products sectors showed mixed results. Though these industries witnessed some improvements in export orders and delivery times, they still grappled with sluggish overall demand and rising input prices.
The input cost inflation in non-metallic mineral products was the most pronounced among all sectors, while the wood and paper industry reported the most moderate cost increases. Notably, final product prices in the electrical and electronics sector rose at their fastest rate since September 2024.
Delivery Times Improve in Some Sectors
One relatively positive trend observed in July was the shortening of supplier delivery times in seven of the ten sectors. Weak demand has lessened pressure on supply chains, allowing vendors to fulfill orders more quickly. The most significant improvement was reported in the wood and paper products sector.
Despite this, the overall impact on operational efficiency remains limited due to the broader slowdown in industrial activity.
A Persistent Downward Trend Since Late 2024
The July PMI figures confirm a trend of uninterrupted deterioration in Türkiye’s manufacturing conditions since March 2024. Analysts point to a combination of factors contributing to the downturn, including weak domestic consumption, tightening financial conditions, high borrowing costs, currency depreciation, and geopolitical uncertainty in the region.
Manufacturers across Türkiye have been increasingly vocal about the need for policy interventions to support production, particularly for export-oriented firms struggling with global competition and elevated energy costs.
Implications for Türkiye’s Economic Outlook
The sustained decline in the manufacturing PMI casts a shadow over broader economic projections for the second half of 2025. While the services and tourism sectors have shown signs of recovery and resilience, the industrial sector’s prolonged weakness could dampen overall GDP growth and fiscal performance.
Economists warn that unless new stimulus measures are introduced or demand conditions improve organically, the current pace of contraction may persist well into 2026. Calls for targeted tax incentives, investment in industrial infrastructure, and export subsidies are growing louder among business associations.
Hope for Rebalancing Through Innovation and Market Diversification
Despite the current difficulties, some sector leaders remain cautiously optimistic. Türkiye’s growing interest in digital transformation, renewable energy technology, and smart manufacturing may offer long-term opportunities for innovation-driven growth.
Efforts to diversify export markets, particularly in Central Asia, Africa, and Southeast Asia, could help counterbalance weak European demand, which continues to affect key Turkish industries like automotive parts, machinery, and apparel.
Still, without a marked improvement in consumer confidence and financial stability, many manufacturers are expected to maintain a cautious approach in their operations and hiring decisions.
Conclusion of the July Outlook
The July 2025 PMI data paints a sobering picture of Türkiye’s manufacturing sector, marked by deteriorating demand, rising input costs, and sector-wide employment contraction. While a few bright spots exist—such as the rebound in electronics and improved supplier delivery times—these are insufficient to reverse the broader trend of decline.
As Türkiye navigates the complex interplay between inflation, currency volatility, and global trade challenges, policymakers and industry leaders must work together to implement strategies that revitalize manufacturing activity. Without such coordinated action, the prolonged industrial slump could further strain economic recovery efforts and hinder sustainable growth.
