Turkey: Capacity utilisation rate retraces from a two-year high in November

Turkey: Capacity utilisation rate retraces from a two-year high in November
Emre Tekmen - Market Economics | 26 Nov 2013

Seasonally adjusted capacity utilisation rate fell 0.8pp to 74.9% in November, paring back last month’s increase of similar amount. As a result, capacity utilisation rate is now back at its June-September average, down from a two-year high of 75.7% in October. The decline in the capacity utilisation rate was mainly driven by intermediate goods production, namely manufacture of chemicals and plastics. Capacity utilisation rate in non-metallic mineral production, a strong proxy for construction sector, declined 1.5pp and trimmed the 2.5pp increase in October. Among export-oriented sectors, manufacture of textiles and basic metals were broadly flat whereas capacity utilisation rate in automotive production fell for the third consecutive month.

Seasonally adjusted real sector confidence index posted a slight decline of 0.4 points to 111.3 in November. Expected production, employment and new orders remained robust. The survey also showed that both unit costs and sales prices are expected to increase.

All in all, the decline in the capacity utilisation rate in November should be seen as a correction to the rise in the previous month. Still, survey data hints that manufacturing activity remains relatively resilient. Similarly, real sector confidence index does not signal a deceleration in economic activity for now. At the same time, the cost-push pressures due to the delayed impact of the TRY depreciation seems to be still intact, as survey data showed. We continue to expect 2013 GDP growth at 3.5% with risks on the upside, but GDP growth is likely to decelerate towards 3% next year on the back of a tighter monetary policy by the CBRT.