Türkiye | Mild deceleration in activity so far

Industrial production (IP) surprised to the downside and grew 4.1% y/y in August, implying 3.7% y/y in July-August period (vs. 10.7% in 2Q). Monthly GDP indicator nowcasts a quarterly GDP growth of 0.5-1% for 3Q, while we maintain our 2022 GDP growth forecast at 6%.

Key points

• Key points:
• Monthly IP improved only partially with 2.4% m/m, after a 6.1% m/m decline in July when bridge day effects had weighed.
• There was a wide-spread worsening in the production of both export-oriented and domestic demand driven sectors, implying a significant adjustment in early 3Q and confirming the downward pressure on exports.
• In spite of a continuing high inflation environment, private consumption remains to be the main driving factor behind overall GDP growth with a very limited slow-down as of early October.
• Since the demand side of the economy -particularly consumption- seems to be much stronger supported by the continuing employment gains, we might still observe some depletion from inventories.
• Strong economic activity during the first half of the year, continuation of loose economic policies, new credit packages and other potential populist measures ahead of the elections lead us to maintain our 2022 GDP growth forecast at 6%.

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