Turkey: September industrial production declines 1.6 m/m

While industrial production in Turkey increased by 0.4% in August compared to the same month of the previous year, according to calendar adjusted data; Seasonally and calendar adjusted industrial production contracted by 1.6% compared to the previous month. According to unadjusted data, industrial production increased by 0.4% compared to the same period of the previous year. Thus, the annual change in three-month averages in industrial production declined to 2.5%, the lowest level of the post-pandemic period (post-July 2020).

The leading indicators of the economy are sending the signals of the slowdown that started as of the end of 3Q22 and will deepen in 4Q22, on the verge of loss of momentum in the industry. Changes in global growth trends in recent months also negatively affect Turkey through foreign demand. The slowdown in export orders, especially in the sub-details of the PMI indicator, causes deep regressions in general production trends. We anticipate the limiting impact of the current situation on real sector activity for the coming months. The data pointing to the loss of activity in the global PMIs as of the beginning of 4Q22 confirms the problems in energy supply, geopolitical risks and the limiting effects of the global monetary tightening. As of October, Turkey's manufacturing PMI indicator with 46.9 deepened its movement in the contraction zone and drew attention to the slowdown trend in the industry.

On the other hand, it is observed that the growth in exports, which was able to meet more imports to a certain extent throughout the year, has stagnated in recent months. By the way, the course of commodity prices reveals the effects of the high increase compared to the previous year on import figures. Therefore, the increasing foreign trade deficit limits the contribution of net exports to growth.

When we look at the details; While mining and quarrying decreased by 2.6% on a monthly basis, it contracted by 16.5% on an annual basis. While a decrease of 1.6% was observed in the manufacturing industry on a monthly basis, there was a growth of 1.7% on an annual basis. In the electricity, gas and steam group, there was a decrease of 1.7% on a monthly basis and a contraction of 2.4% on an annual basis. On a monthly basis, non-durable goods decreased by 2%, durable goods by 1.8%, intermediate goods by 1.6%, energy by 1.4% and capital goods by 1.3%. Looking at the annual changes in the related items; while non-durable consumer goods increased by 7.3%, capital goods by 7.2% and durable consumer goods by 0.3%; intermediate goods decreased by 5.1% and energy by 1.4%.

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

As of the end of 3Q22, a complex picture is seen in the production indicators. Although there has been a serious slowdown in indicators such as PMI and real sector confidence index, more moderate changes are observed in the CUR, the main indicators of production. While imports of intermediate goods do not show a rapid decline, energy blurs the forward-looking picture. The automobile and light commercial vehicle market showed a limited growth in October after the contraction in August and September. On the housing sector side, we follow significant contractions. Although commercial loans are gaining momentum, regulations that complicate the real sector's access to loans may limit the potential.

It is understood that the growth will not be very high for the rest of the year. 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 5.5% throughout the year. We note that this forecast is in line with the 5% band, which is the MTP projection, and the forecasts of international organizations that have recently been revised to similar levels.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı