Turkey: A good start to 3Q

After a temporary setback by -3.5% month on month in June, indicative of the challenging recovery process, industrial production (seasonal and calendar-adjusted basis) recorded a sharp correction by +4.3% MoM in July - the largest since mid-2016. Such volatility is likely attributable to the Ramadan effect, as statistical adjustments are not always enough. On the other hand, calendar-adjusted industrial production stood at -1.2% YoY, continuing a sequence of negative readings since September 2018 - though this is the least negative figure in this period.

The monthly increase in the IP to the highest point since the financial volatility in 2018 is attributable to intermediate, energy and capital goods, providing positive signals for future production, while non-durable consumer goods also stood out among major drivers. On the flip side, durable consumer goods recorded a production decline on a monthly basis, limiting the growth in adjusted IP, likely attributable to the expiration of tax cuts in July.

Among the sectors, other transport equipment (dominated by defence industry products) was the sector providing the highest monthly contribution to IP performance, followed by textiles and wearing apparel. Only three sectors dragged the adjusted IP growth in July, likely a signal of improving sectoral diffusion of economic activity. Among those, furniture stood out, reflecting weakening demand with the expiration of tax cuts in these items.