In December, seasonally and calendar adjusted Industrial Production Index (IPI) increased by 5.0% mom and 8.0% YoY. Thus, the recent outlook in survey indicators for the manufacturing industry was confirmed by the data. Quarterly, the increase was realized as 3.4%, which could not compensate the cumulative contraction in the second and third quarters.
It is possible to say that the increase in December and the last quarter was spread across all sectors with a few exceptions. However, the rate of increase is not balanced across sectors. About half of the increase in December stemmed from other transport vehicles and computer-electronic and optical equipment sectors. Approximately 1.3 points of the quarterly growth come from other transport vehicles. Therefore, the strong movement in December is not equally valid in terms of the underlying trend.
Survey indicators pointed out that the improvement in industrial production in the last quarter was driven by the recovery in domestic demand. The same indicators point to a correction in January. This outlook suggests that the revival in demand in the last quarter may have been fueled by the demand that was brought forward to avoid the expected cost increases. Therefore, both the possible correction in volatile items and the signals regarding the underlying trend suggest that the IPI may weaken again in the first quarter of 2025.
The weakening external demand outlook also seems to be another factor limiting the IPI. Following this strong outlook for the IPI in December, our backcast models also started to imply higher values for annual GDP growth in the last quarter. Although not all the data in our models have been finalized yet, with the available data, an annual growth rate of 3.0% and above in the last quarter seems possible. We assess that the quarterly growth corresponding to this annual growth will be strong. This outlook points to a stronger demand outlook for the last quarter of 2024 than the flat output gap forecasts in the last Inflation Report.
Source: Akbank Economic Research
Translation: Cem Cetinguc