Latest Turkish Economy Overheating Indicators
On Wednesday, we saw another mild Industrial Production, whether you look at at yearly:
or monthly data:
You can get the full details from Citi’s short note, but I will make a couple of observations in my usual traditon. For one thing, although there is a moderation in growth, my recent concerns still hold:
I.e. the moderation is coming more from export-oriented sectors. BTW, although Turkey does export lots of cars, the domestic demand is going extremely strong, despite some recent slowdown. And besides, with imports going so strong, you need to look at imports along with domestic production to have a better idea of domestic demand. For example, have a look at the leading indicators of investment in Industrial Production and Imports:
As you can see, growth of machinery & equipment production, while still strong, is slowing down, but capital goods imports are still going strong, as evindenced by Friday’s trade volume data.
In sum, definitely a positive IP print, but not as positive as claimed by most Turkey economists. Besides, many economic data temporarily fall before elections in Turkey, only to rebound back afterwards, so we’ll need to wait and see a bit.
BTW, a big part of this equation depends on what the government will do (in terms of policy) after the elections. I will talk about that in my Turkish elections post, which will be up in a couple of hours.
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