Macro Focus: November Still Strong in Q4

In November, IP increased by 1.3% MoM and 11% on a YoY. According to the consensus, the second IP data set for 4Q20 was expected to increase by 9.1% YoY (YF: +6.4% YoY, Prior: +4.9%). On the other hand, unadjusted IP increased by 8.7% YoY (YF: +8.2%). On a monthly basis, all main industrial groups recorded increases, except non-durable goods. Intermediate goods recorded 7 monthly increases in a row whereas capital goods recorded 6th monthly increase in the last 7 months. To recall, capital and intermediate goods are important indicators for the sustainability of the medium term economic growth outlook. Durable goods also gave a positive but limited contribution to the headline figure.


Manufacturing sector recorded increases of 1.5% MoM and 11.6% of YoY.  The highest positive contributions to the MoM increase, which was led by the manufacturing sector (MoM contr.:+1.3pps), came from the manufacture of other transport equipment (MoM contr.: +0.4pps) manufacture of electrical equipment (MoM contr.: +0.3pps) and manufacture of machinery-equipment (MoM contr.: +0.2pps) while the highest negative contributions came from manufacture of motor vehicles (MoM contr.: -0.2pps), manufacture of wearing apparel (MoM contr.: -0.2pps) manufacture of food products (MoM contr.: -0.1pps).


Economic growth still seems strong in Q4. 2 of 3 IP data set for Q4, which is one of the most important leading indicator of the economic growth, was positive. High-frequency data (like electricity consumption and credit card expenditures) also signed that the recovery trend in the economic activity continues in Q4, but losing steam. Strong loan growth trend in the previous quarter also normalized recently. Additionally, decreasing social mobility due to the increasing COVID-19 cases and tighter financial conditions put a negative pressure on the recent recovery trend. Nevertheless, economic growth in 4Q would be at strong levels probably due to the inertia of the rebound in Q3 thanks to the strong loan growth. We expect annual economic growth in 2020 could be around 1.6%. The sustainability of the economic growth would still highly depend on the tightness level of the financial conditions and developments on the pandemic. The third and last IP data set (December) for 4Q20 to be announced on February 12 whereas Turkey’s 4Q20 GDP data would be announced on March 1.


Source: Y. F. Securities Research