Turkey’s industrial production growth slowed to 1.0 percent year-on-year in August 2022 from an upwardly revised 2.5 percent in the previous month, and well below market expectations of 2.7 percent. It was the smallest increase in production since a contraction was recorded in June 2020, as capital goods output rose at a slower pace (3.6 percent vs 11.4 percent in July) and as declines were reported in the production of both intermediate goods (-4.3 percent vs -0.6 percent) and energy products (-2.2 percent vs -3.7 percent).
On the other hand, output picked up for both durable (8.2 percent vs -0.7 percent) and non-durable consumer goods (9.4 percent vs 6.0 percent). On a seasonally adjusted monthly basis, industrial production rebounded 2.4 percent in August, following a 6.1 percent slump in July.
Annualized growth of industrial production declined to a mere 1%, with three month moving average figure pointing to sharp deceleration. Former Central Bank research head and academic Hakan Kara stated that the slump is largely driven by the recession in Europe, which is dampening demand for Turkish exports.
According to the research team of Yatirim Finans, a leading Turkish broker, preliminary indicators of industrial activity for September, such as ISO-S&P Global manufacturing PMI and electricity consumption chalked up new declines, heralding continued deceleration in autumn. Industrial production, along with credit momentum are the most reliable leading indicators of growth for Turkey. Thus, the economy is headed for a winter lull, unless Erdogan’s ambitious subsidized loan program for small businesses, worth ca $6 bn to be lent through Halkbank manages to stimulate production. However, businesses are unlikely to use the loans at a time when domestic and external demand are slowing down, as the May or June 2023 presidential and general elections cause growing uncertainty about economic policy and government change.
PAIntelligence
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