Turkey: Solid IP growth in October

At 7.3% YoY in October, industrial production index (calendar adjusted) growth was well above consensus at 5.3% YoY. Sector-wise, manufacturing production was the source of improvement in YoY performance, lifting October IP by 6.4ppt, followed by "electricity, gas, steam and air conditioning supply" with +0.9ppt, while the impact of mining and quarrying on the headline was negligible. On the other hand, following positive readings in the previous three months, the seasonal and calendar adjusted (SA) IP index remained in positive territory at 0.7%, and hinted at continuing strength in industrial activity.

Among broad economic categories, production in durable good turned deeply negative at -18.5% MoM, showing a normalization after the last minute impact of favourable tax treatment that was reversed at the end of 3Q. Another negative reading was in energy, at 2.72% MoM, somewhat moderated by the relatively strong figure in September. On the flipside, heavyweight contributors to the headline - intermediate goods and nondurable consumer goods - were positive at 1.15% MoM and 0.91% MoM. Finally, a jump in production of capital goods by 8.2% MoM was noteworthy, showing a strong start to 4Q after a contraction in 3Q. Capital goods production has been volatile in recent periods and whether this strong figure is a start of a more sustainable recovery in investment appetite is yet to be seen

In the manufacturing sector, food products turned out to be the major contributor (0.90ppt), followed by automotive that, once again, provided a high contribution to monthly performance due to continuing demand from the EU, pulling the calendar adjusted headline up by 0.76ppt. Fabricated metal products and machinery and equipment were other strong performers at 0.73ppt and 0.67ppt respectively. Basic pharmaceuticals and refined petroleum products, on the other hand, were the only groups that dragged on the headline.