Industry slump expected to slow down

Bloomberg

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The slump in Turkey’s industrial output probably eased for the third consecutive month in May, indicating the worst of the country’s recession may be over, a survey showed.

Output fell 16.7 percent from the year earlier, according to the median estimate of eight economists surveyed by Bloomberg, following a decline of 18.5 percent in April. The statistics office in Ankara will announce the figures at 10 a.m. tomorrow.

The pace of decline has slowed from a record 23.8 percent in February as domestic demand shows the first signs of picking up. The economy shrank a record 13.8 percent in the first three months of the year as the global crisis battered demand at home and in European Union export markets.

Signs of domestic recovery

"It’s important that the contraction is narrowing because it would amount to a slight positive that points to recovery," said Haluk Bürümcekçi, chief economist at Fortis Bank in Istanbul, who expects gross domestic product to contract 8.7 percent in the second quarter. "While exports are still bad, we are seeing signs of recovery domestically."

The Central Bank has cut its benchmark interest rate by 8 percentage points in as many months, taking it to a record low of 8.75 percent, to boost consumer spending and investment. Central Bank Governor Durmuş Yılmaz said on June 4 that he expected the decline in industrial production to "stabilize" in the second quarter.

The statistics agency will release capacity utilization data for last month on July 10. Capacity usage increased to 74 percent from 70.4 percent a month earlier, according to a Bloomberg survey.

The Central Bank will also report May’s current account, the broadest measure of trade in goods and services, on July 10. The shortfall in the current account widened to $1.8 billion from $1.2 billion in April, according to the median estimate of six economists in a Bloomberg survey.

The benchmark stock index gained 0.1 percent last week to 36,797 points. The Turkish Lira weakened to 1.5346 to the dollar at 5:22 p.m. in Istanbul on July 3 from 1.5336 a week earlier. The yield on the benchmark lira bond tracked by ABN Amro fell to 11.63 percent from 11.99 percent.

In a written statement Monday, the Central Bank said the path of inflation was towards "historic lows" even after the inflation rate rose last month. June inflation accelerated due to temporary factors such as consumption tax increases on cars and home appliances, the statement said.