Turkey | Solid activity in Q2 despite deceleration

Summary

Industrial Production (IP) grew by 24% yoy in both calendar adjusted and unadjusted terms in June, implying above 40% yoy growth in 2Q on the back of base effects. Given the strong activity so far in 1H and upward revisions on the global outlook we expect 2021 GDP growth to be 9%, with risks still on the upside.

Key points

• Key points:
• The quarterly growth rate of IP implied some loss of momentum in 2Q21 compared to 1Q21 (1.6% vs. 2.7% respectively) despite the acceleration with the reopening impact in June given that IP grew 2.3% monthly in June (vs 1.5% in May).
• Exporting sectors production weakened in 2Q (stronger external demand could be compensated by inventories), while domestic demand oriented sectors maintained a similar contribution compared to 1Q.
• The main contributors on monthly growth were consumer goods production (durable & non-durable goods, respectively 4.9% and 4.3%) and capital goods production (3.6%).
• Our monthly GDP indicator nowcasts a yearly growth rate of 26% in June, which is followed by a moderation of 18% in July and 13% in early August.
• Domestic demand is likely to weaken in the rest of the year on tighter financial conditions and potential indirect effects from the expiration of ban on firings, however external demand will likely remain supportive when the positive global outlook considered.

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