Turkey: Industrial production turns positive

Industrial production (calendar-adjusted) growth in March turned out to be 7.6%, driven by manufacturing production pulling the headline up by 7.0ppt, while contributions of "electricity, gas, steam and air conditioning supply" and “mining and quarrying” were also slightly positive. After two consecutive negative readings, the seasonal and calendar adjusted (SA) IP index turned positive in March for the first time since May last year, growing 0.21% month-on-month. However, the 1Q performance of 0.8% compared to 2.3% and 3.2% quarterly growth in 4Q and 3Q, respectively, shows a moderation in industrial activity to the lowest level since 3Q16- which was significantly impacted by the failed coup attempt.

Among broad economic categories, the only sector with a negative reading was the intermediate goods at -1.1% MoM, while the sequential quarterly performance in this group shows a gradual softening to 1.4% in 1Q from 3.9% in 3Q and 2.3% in 4Q. This is also the case for another heavyweight, undurable consumer goods from 3.9% in 3Q to 1.9% in 1Q, though March production was positive at 1.2% MoM following contractions in the first two months of 2018. Both sectors confirm the expected momentum loss in economic activity. Among other groups, durable goods and energy recorded some improvement in 1Q, but remained in negative territory. Finally, capital goods production which has been volatile in recent periods registered a contraction in 1Q at -0.7% down from 4.5% QoQ a quarter ago, likely showing the impact of recent market volatility on investment decisions and decelerating lending expansion.