Turkey’s industry suffers new collapse in September raising concerns over Q4 growth

Turkey’s industry suffers new collapse in September raising concerns over Q4 growth
By bne IntelliNews November 8, 2016

Turkey’s calendar-adjusted industrial production declined 3.1% y/y in September, data from statistics office TUIK showed on November 8.

The reading defies market expectations as economists were looking for output to keep August's annual growth pace of 2.2%, according to a survey by Anadolu Ajansi. The decline in September is raising concerns about the country's economic growth in the last quarter of the year. GDP growth already slowed to 3.1% y/y in the second quarter from 4.7% in the first three months of the year. 

“Today’s data, coming on the back of extremely weak activity figures earlier in the quarter, indicate that Turkish GDP contracted between Q2 and Q3,” analysts at Capital Economics write in a note. The recent improvement in Turkish business surveys, however, suggests that the collapse in industrial production in September was probably a temporary blip, the analysts say.

The country’s central bank recently warned that indicators for the third quarter point to further deceleration in economic activity. “In addition to the deepening tourism slump, the mid-July domestic turbulence and working day losses due to religious holidays dampened production activities,” the bank said in its quarterly inflation report, released on October 27. The bank, however, believes domestic demand and economic activity will recover starting from the last quarter of the year.

On a calendar-adjusted basis, intermediate goods production was down 1.6% y/y, durable consumer goods collapsed 9.5% y/y, non-durable consumer goods fell 6.5% y/y and energy output contracted 0.3% y/y in September. Production in the capital goods manufacturing sector declined for the third consecutive month with the rate of decline accelerating to 2.3% y/y in September from 1.4% in August. In July, output in the sector was down 6.3%.

TUIK data also showed that Turkey’s manufacturing output fell 3.7% y/y in September after rising 1.4% y/y in the previous month. But the good news is that the latest PMI survey suggested some recovery in manufacturing activity. In October, the PMI rose to 49.8 points from 48.3 a month earlier, supported by an increase in new export orders and stronger purchasing activity.

The unadjusted industrial production index fell by 4.1% y/y in September, versus 2.8% y/y increase in August, missing the market consensus forecast for a 2.5% y/y rise.

Calendar-adjusted Industrial Production Growth by main Industrial Groups (y/y, %)      
  July August September
Total Industry -4.8 2.2 -3.1
Intermediate Goods -5.5 0.9 -1.6
Durable Consumer Goods -16.6 1.0 -9.5
Non-durable Consumer Goods -4.8 5.8 -6.5
Energy 1.9 3.7 -0.3
Capital Goods -6.3 -1.4 -2.3
Source: tuik      

Data

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