Unexpected rise of industry revives hopes for growth

ANKARA

The Turkish industrial production has surged by 3.36 percent on annual and 1.8 percent on a monthly basis in July. DAILY NEWS Photo

Turkey’s Industrial production grew at its fastest pace this year in July, as the economy continued to grow during the month.

Exceeding market forecasts, calendar-adjusted industrial production increased by 3.6 percent compared with the same month last year, according to the industrial index announced by the Turkish Statistical Institute (TÜİK) on Sept. 8.

The unadjusted industrial production declined by 4.7 percent during the month, mainly due to a decline in the number of workdays compared with last year because of Ramadan.

“While the decrease in the number of work days has been effective in the contraction of unadjusted industrial production, the calendar- and seasonal-adjusted figures indicate that the economic activity has started the third quarter faster than we expected,” HSBC Portfolio Strategist Ali Çakıroğlu told Reuters. “The released figures point to a positive outlook,” he added.

Energy sector leads

In the subsectors of the industry, the mining and quarrying index increased by 0.4 percent, manufacturing index increased by 3.4 percent and electricity, gas, steam and air conditioning supply index increased by 6.2 percent in July, compared with the same month last year, the TÜİK data also showed.

The Turkish economy grew 4.3 percent in the first quarter of 2014, mainly due to strong exports that benefited from a weak Turkish Lira in a period marked by a fragile domestic market, high interest rates and a tense political environment.

The industrial production, which is one of the main indicators of the economic growth, contracted 2.5 percent throughout the quarter due to the adverse impact from the fragile recovery in Turkey’s main market, the European Union, and escalating geopolitical tensions.

Mainly based on the weak industrial production and trade performance, analysts surveyed by news agencies predict the growth will slow down to around the 2.65-2.80 percent level in the second quarter.

Central bank policies ‘decisive’

Erdal Tanaş Karagöl, economy director at the Ankara-based non-profit SETA Foundation for Political, Economic and Social Research, told Anadolu Agency that both the U.S. Fed decision about an interest rate hike and the impact of the insurgency in Iraq on oil prices are also causing concerns among Turkish business circles.

A financial analyst from Destek Securities, Eren Can Umut, said the Turkish and foreign central banks’ interest rate messages had been key in the robust industry performance.      

“July saw an industrial increase because of the Turkish Central Bank’s signal to cut its main interest rate further and that domestic demand in the country was better than expected,” he said, adding that the European Central Bank’s decisions would also have an impact on Turkish businesses in the forthcoming months.