January's industrial production was 2.1% y/y, slightly below the market and our expectations of 2.5%. On a seasonally and calendar adjusted basis, IP increased by 2.3% m/m, following a decline of 3.5% m/m in December. January industrial production index shows that CBRT's monetary easing has started to reflect on manufacturing activity. Strong January IP figure combined with robust credit growth, confidence indices and PMI, points that the pickup in the economic activity will continue in Q1.
As of January, Turkish Statistical Institute (Turkstat) changed the base year of the industrial production index to 2010 from 2005. Additionally, Turkstat extended the range of seasonally adjusted series by adding detailed subcomponents, more specifically 2-digit economic activities based on NACE Rev.2 classification system, to industrial production index. Previously, only headline and main industrial groupings (durable, undurable, capital, and intermediate goods) were released on a s.a. basis. Turkstat also changed the seasonal adjustment methodology from direct to indirect method. According to new methodology, total index will be calculated with the weights of seasonally and calendar adjusted indices of two-digit economic activities. As sub-indices of industrial production index exhibit quite distinct seasonal patterns (depicted in Chart 2), seasonally adjusted headline index will be more sensitive to the sectoral fluctuations in industrial activity starting this month. Turkstat revised the sectorial weights as well. The weight of mining and quarrying increased to 6.1% from 3.6% while the weight of manufacturing decreased to 81.5% from 85.9% in new base year. In manufacturing, weight of food manufacturing increased to 11.7% from 10.6% and became the sector with the highest share in manufacturing sector.
On a seasonally adjusted basis, intermediate goods and undurable consumer goods increased 3.3% and 2% m/m, respectively. Capital goods constituting 16.5% of industrial production index increased 2% m/m. On the other hand, durable consumer goods declined 0.6% m/m. The growth trends in export oriented sectors diverged on a sa basis. Industrial production indices for textile (3.4% m/m) and motor vehicles (10% m/m) increased, while the production of wearing apparel and basic metals contracted 0.3% m/m and 2.5% m/m, respectively. Domestic market sensitive sectors showed a m/m increase on a s.a. basis signalling that domestic demand is picking up. Manufacture of food products and beverages increased 1% m/m and 5.1% m/m, respectively. Manufacture of chemical products increased 3.7% m/m. The production of electrical equipment and machinery and equipment expanded 0.5% and 7.2 % m/m, respectively. The production of other non-metallic mineral products, a strong proxy for the construction sector increased 1.7% m/m.
Revised IP methodology did not have a major impact on the industrial production growth on a yearly basis. Consequently, we keep our growth forecast at 2.5% for 2012.
Selim Çakir
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