Production data signals slowdown in economy

ISTANBUL- Hürriyet Daily News

Employees work at an assembly line at an Istanbul plant which produces car parts. Turkey’s industrial production dropped 2.5 in November 2011 from a month earlier. DAILY NEWS photo

Turkey’s industrial production in November 2011 grew 8.4 percent from November a year earlier, signaling that the real economy is still going strong, but economists project a slowdown for December as the Central Bank continues to tighten monetary policy.

The 8.4 percent industrial production result was completely in line with market expectations. However, there was a 2.5 percent fall from October 2011, which was the largest drop since June 2010.

“Despite the sour global developments the Turkish economy shows a significant resilience and this was mainly due to historically low interest rates and lira depreciation that supported the overall export performance,” said Chief Economist at BGC Partners Özgür Altuğ in a written statement.

Altuğ showcased Turkey’s furniture sector in particular, saying that it had increased its export activity and had registered a 15.3 percent production increase, according to the November data. Altuğ, however, expects a slowdown in the December outcome.

“We expect to see a sizeable slowdown in year-on-year industrial production growth in December (toward 3 percent), since loan growth in December slowed down further,” he said.

Serkan Gönençler, economist at Arma Portföy, also believes data will show a drop in December industrial production growth.

“We expect industrial production growth to slow to 3 to 4 percent after December, and it is likely that these figures will drop even more going forward,” said Gönençler in a written statement.

“We see a slump in domestic demand as a result of the monetary policy tightening in October and the slowdown in consumer loans. However, despite the fact that industrial production has lost a bit of momentum, it is still registering high readings,” wrote Akbank’s Economic Research team.

Nihan Ziya-Erdem, economist at Garanti Bank, told Reuters, “November was too early to see the impact of the Central Bank’s tightening policy but will start to be felt in December.”

JP Morgan’s economist Yarkın Cebeci echoed this sentiment by saying, “As the Central Bank tightens monetary policy even more in 2012 we expect the slowdown in industrial production to be felt much more.”