Turkey: August industrial production increases 2.4% m/m

In August, industrial production in Turkey increased by 1% compared to the same month of the previous year (July 2.5%), according to calendar adjusted data; Seasonally and calendar adjusted industrial production increased by 2.4% (July -6.1%) compared to the previous month. According to unadjusted data, industrial production increased by 4.1% compared to the same period of the previous year. Thus, the annual change in three-month averages in industrial production decreased to 5.4%, the lowest level of the post-pandemic period.

Although the annual increase in industrial production decreased compared to July, and there was a recovery in both total industrial production and industrial sub-branches on a monthly basis, it is seen that the previous month's 6.1% decline was not fully reversed. The slowdown in both annual changes and annual changes in quarterly averages indicates that the growth pace lost momentum in 3Q22. In these effects, we evaluate the risk factors that create a barrier on both domestic demand and foreign demand. The negative economic growth outlook triggered by geopolitical problems and the energy crisis, spread throughout the EU, especially in Germany and Italy, in our trade partners creates a potential limiting effect on our total industrial production.

When we look at the details; While mining and quarrying decreased by 3.9% on a monthly basis, it contracted by 12.4% on an annual basis. While an increase of 2.7% was observed in the manufacturing industry on a monthly basis, there was a 2.2% growth on an annual basis. In the electricity, gas and steam group, there was an increase of 2.8% on a monthly basis and a contraction of 3.5% on an annual basis. On a monthly basis, durable goods decreased by 6.1%, capital goods by 4.4%, non-durable goods by 4.1%, energy by 1.4% and intermediate goods by 0.5%. Looking at the annual changes in the related items; while non-durable consumer goods increased by 9.4%, durable consumer goods by 8.2% and capital goods by 3.6%; intermediate goods decreased by 4.3% and energy by 2.2%. When the technology groups are examined, the calendar adjusted data show that the low technology group increased by 2.3%, the medium-low group increased by 2%, and the medium-high group increased by 5.7%. The high technology group, on the other hand, decreased by 3.5%.

Industrial Production, 3-month moving average, annual % change. Source: TurkStat, Tera Yatirim

In conclusion, although there is an increase that can be considered normal on a monthly basis, it is obvious that this did not eliminate the sharp contraction in July and the industry lost momentum. It is important that there is no disruption on the energy supply side, in terms of the sustainability of the industry and meeting the domestic and foreign demand in the sectoral sense. The positive side of the matter is that the supportive and broad economic policies implemented will support the domestic demand side at least in terms of industrial activity, or that the countries experiencing disruption in the supply chain see Turkey as an alternative source. However, it seems that there will be no supporting demand from abroad. The supply shock to be created by the energy cuts in Europe will have an effect that will bring down the production trends of Turkey as well as the continent in general.

It is understood that the growth will not be very high for the rest of the year. While industrial production is posting weak signs, manufacturing PMI in other leading indicators that will complete the 3Q22 period fell to 46.9 in September. Manufacturing industry capacity utilization rate, on the other hand, was 77.4% in September. In the IMF's Global Economic Outlook October 2022 report published yesterday, Turkey's growth rates were projected to be 5% for 2022 and 3% for 2023. Regarding the world economy, we saw that the expectations of recession and slowdown in growth were more prominent. We calculate that starting from 3Q22, the path of the first two quarters, which is above 7.5% for Turkey, will not be preserved, and the growth will be 5.3% throughout the year.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı