Turkey: Industrial production falls again in February but signs of a bottoming out emerge
Industrial production dropped 5.1% year-on-year in February on calendar-adjusted terms, which is an improvement compared to the downwardly revised 7.4% contraction in January (previously reported: -7.3% year-on-year). This latest fall in output came on the back of contractions in the mining and quarrying, and manufacturing sectors; however, as production fell at a softer pace and output in the energy sector picked up, the headline figure improved. Annual average industrial production fell 1.0% in February, contrasting the 0.2% expansion in January.
On the other hand, month-on-month data is seemingly showing signs of a recovery in the sector. Production in the industrial sector grew 1.3% mom on a seasonally- and calendar-adjusted basis in February over January, when output expanded 1.0%. This marked the best result since July 2018 and suggests that the downturn in the industrial sector has bottomed out following last’s year’s currency crisis. However, the recent bout in currency volatility in the lead-up to the 31 March local elections could drag on production going forward. The research team at BBVA noted that economic policy will be a key determinant in the apparent ongoing recovery in the sector in the face of renewed financial volatility.
Also commenting on the month-on-month data, Muhammet Mercan, chief economist at ING Turkey, noted that the data “supports the view that the growth outlook has been improving lately amid rising credit momentum and a gradual recovery in confidence indicators. But downside risks remain. […] The improvement this year shows a gradual change in direction after volatility last year caused a significant adjustment in economic activity, although the pace of recovery in industrial production is still weak.”