Türkiye | Momentum loss in activity

Summary

Industrial production (IP) declined by 0.8% m/m in seasonal and calendar adjusted series, while increasing by 3.1% y/y on calendar adjusted terms. We expect GDP to materialize close to 4.5% in 2023, whereas gradual interest rate hikes on top of relatively supportive fiscal policy could lead 3.5% growth in 2024.

Key points

• Key points:
• On monthly basis, the deterioration in industrial production was broad based except energy sector. Consumption, intermediate and capital goods production contracted by 2.4%, 1.1% and 0.2% mom, respectively whereas energy pevented further decline as 2.4% monthly growth due to extremely hot weather during July and August.
• The turnover indices deteriorated in August on monthly basis, declining by 6.2% m/m, while quarterly trends in real turnovers showed a widespread slowdown across all sectors, confirming our deceleration expectation in 3Q.
• Domestic demand started to ease as retail sales volume contracted by 4.7% m/m for the first time since Feb23, a period marked by the impact of the earthquake. Also, our big data consumption indicator signaled further deceleration in September and the first 10 days of October especially on the back of services consumption while goods consumption remained relatively strong.
• Our monthly GDP Indicator nowcasts 5.7% annual GDP growth in 3Q (27% of info.) and 4% as of October (23% of info.), indicating close 0.6% q/q in 3Q23 and more deceleration in October.
• While we observe some normalization in aggregate demand, the supply side remains weak. Nevertheless, the recent reduction in the costs of rediscount loans for exporters, the recovery of commercial loans and construction expenditures in the earthquake zone may support production in 4Q23.

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