Turkey’s industrial output contracts on month for first time in a year

After a long and continuous rebound in industrial production (seasonal and calendar adjusted, SA) following the reopening from the first wave last year, we saw the first sequential contraction in April, at -0.9% month-on-month (vs our call at -0.5% MoM). The data support the view that activity is losing momentum given pandemic-related restrictions, higher currency volatility and tightening financial conditions. In year-on-year terms, industrial production (calendar adjusted) printed a significant 66% expansion, in line with expectations due to the presence of a large carry-over from 2020.

Regarding broad economic categories, intermediate goods production was the major driver of the monthly drop, pulling the headline down by 0.9ppt, followed by durable consumer goods at -0.5ppt. While the heavy-weight intermediate goods slowdown supports expectations of a loss in momentum, frontloaded purchases of durable goods since the second half of 2020 are likely starting to constrain production activity. On the flip side, capital goods production has remained strong with a +0.4ppt contribution, though the pace should slow down on the back of moderating investment demand, with elevated interest rates and weak loan growth. Production in a large number of sectors was negative on a monthly basis, while food products, textiles, and automotives turned out to be major drags on the headline.