Turkey: IP Recovers Strongly

Turkey: IP Recovers Strongly

At 11.3% y/y, November’s industrial production index was above the market consensus (%9.9) but below our more optimistic forecast (13.5%). On a seasonally adjusted basis, industrial production increased by 1.5% m/m in November, following a 2.6% m/m decline in October. The decline in October was mainly due to the working day and holiday effects.

The increase in IP was broad-based. On a seasonally adjusted basis durable consumer goods and intermediate goods production increased by 7.6% m/m and 2.7% m/m, respectively on our calculations. Capital goods production increased by 3.3% m/m. Non-metallic minerals production, a strong proxy for construction activity, increased by 2.1% m/m as well. Export market sensitive industries strengthened in November. Textile production increased by 2% m/m following a 4.4% m/m decline in October. Similarly, manufacturing of basic metal and motor vehicles posted a m/m growth on a seasonally adjusted basis, increasing by 1.7% m/m and 2.8% m/m, respectively.

Additionally, we compare industrial production to its long-term trend calculated using HP Filter and recent momentum (3 months moving average). Accordingly, industrial production is above its long-term trend and increasing.

Today’s data is not a game-changer for the CBRT and confirms our expectation of a strengthening economic activity in Q4. Strong PMI, escalating business confidence and imports combined by the pickup in credit growth, induced by the CBRT’s loose monetary policy, all suggest that economic activity has been strong in Q4.

Selim Çakır

Nazlı Karamollaoğlu