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The Kapali Carsi

Industrial Production: Another Turkish data puzzle

At 6.9 percent yoy, December industrial production (IP) came in much higher than expectations of 4.9 percent.

Part of this is base effect; in fact, working day and seasonally-adjusted industrial production was unchanged over the previous month.

However, machinery and equipment, which Turkey economists use as a leading indicator of investment, surged (red is yoy, blue is seasonality and working day adjusted mom- as you can there is more than a base effect here) :

This is particularly interesting, given that companies should have been affected by the exchange rate deprecation/volatility as well as the graft scandal that started in the middle of the month. As you can see, the series used to move along with investment, although the relationship has broken down a bit of late.

So what is going on? My friend Ozlem Derici, chief economist at Deniz Invesment who often graces this blog, asked the equity analysts in her company if there was a huge project going on. None they were aware of! She also looked at public investment numbers from the budget figures, but nothing there either.

One obvious explanation could be the volatile nature of the data. But even quarterly data, which can be used as as leading indicator of growth (and is less volatile), is strong and is hinting at annual growth of just below 4 percent for 2013.

But I would be very satisfied if Turkey grew half that this year; although PM Recep Tayyip Erdogan and his econ top brass are still claiming we will be able to grow 3.5-4 percent…

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