Mixed Results (and a New Weapon) from Central Bank of Turkey’s Business Tendency Survey
The survey is important because not only is it more or less an accurate predictor of growth, it is also the first (earliest) leading indicator. So let’s cut to the chase right away. Here are the main two indicators that come from the survey:
The real sector confidence index fell for the first time since February, but it is still above the critical threshold of 100, which separates expansion and contraction periods. The decrease was across the board, as all except one of the sub-groups fell as well.
As for the darling of the Central Bank (with the improvement in unemployment, it is the main proof of the CBT that the economy is not overheating), the capacity utilization rate, or CUR, rose, but the increase seems to have been mainly seasonal, as the seasonally-adjusted CUR increased only by 0.1 percent. But this is hardly good news. If the CUR does not moderate and reaches pre-crisis levels, behind what other indicator will the CBT hide?
The answer lies in the Business Tendency Survey. Incidentally, or not incidentally, the CBT disclosed a seasonally-adjusted real sector confidence index today. This index is showing that seasonally-adjusted real sector confidence is conveniently on a free fall since almost reaching an all-time high in November of last year.
So maybe, we’ll see CUR replaced by the seasonally-adjusted real sector confidence index in a month or two as proof that the economy is not overheating!
On a more general note, since I haven’t done any formal tests, I need to be convinced that doing seasonal adjustment for this data is correct. I searched for a methodological explanation, in vain. Besides, it is not a good communication strategy to create new indices without pre-announcing them first. I even thought about rewriting Monday’s column, which is about yesterday’s rate decision, to mention this “new hat”. But, 1. I am too lazy. 2. I am too busy with my never-ending Jordan report. 3. I would like to wait until this new index actually replaces CUR first because if the CUR remains moderate, the new weapon may never be revealed:)
BTW, you know that if the CBT is upgrading its arsenal of defense against the overheating terrorists, it is determined not to raise rates, right?:):):)
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