Turkey’s industrial production rebounds in August but still misses expectations

Turkey’s industrial production rebounds in August but still misses expectations
By bne IntelliNews October 10, 2016

Turkey’s calendar adjusted industrial production increased 2.2% y/y in August, rebounding from July's slump of 4.9% y/y following the coup attempt, data from statistics office TUIK showed on October 10.

Despite the improvement, the reading was still a disappointment to the market as economists surveyed by Anadolu Ajansi had expected a 3.4% y/y increase in industrial output. The bigger picture is that growth weakened over the first two months of Q3 and September’s manufacturing PMI suggests that activity remained sluggish at the end of the quarter, analysts at Capital Economics write in a note. “It still looks like the Turkish economy slowed substantially following the coup attempt. And we think that growth will be much weaker in the second half of the year than it was in the first,” the analysts suggest.  

The weaker-than-expected industrial production growth in August adds to concerns over the heath of the economy. Last week, the government cut its GDP growth forecast for 2016 and 2017. Admitting that domestic demand has slowed, the country’s central bank is still confident that economic activity will start to recover in the final quarter of this year. Confirming these expectations, Turkey’s PMI rose to a four-month high in September.

On a calendar adjusted basis, output in the key manufacturing industry rose by 1.5% y/y in August versus 6.5% y/y contraction in July. Immediate goods production increased 0.9%, after declining 5.5% y/y in the previous month. Durable consumer goods output that collapsed 17% y/y in July rose by 1% y/y in August. The increase in energy output accelerated to 3.7% y/y from the previous month’s 1.9% y/y. The contraction in capital goods production continued in August, but at a slower pace: output in the sector fell by 1.3% y/y versus the 6.5% y/y decline in July.

On a calendar and seasonally adjusted basis, Turkey’s industrial production increased by 9.4% m/m in August after declining by 7.2% m/m in July.

The unadjusted industrial production index registered a 2.8% y/y increase in the month, below the market consensus forecast for a 3.3% y/y rise. That followed a sharp 8.4% y/y decline in July.

Calendar-adjusted Industrial Production Growth by main Industrial Groups (y/y, %)    
  July August
Total Industry -4.9 2.2
Intermediate Goods -5.5 0.9
Durable Consumer Goods -16.6 1.0
Non-durable Consumer Goods -5.2 5.8
Energy 1.8 3.7
Capital Goods -6.5 -1.3
Source: tuik