As can be seen from the given table and chart below, the rise in the manufacturing index is even higher at 10.6 percent.
Recovery in the manufacturing industry for the first half of the year is quite significant. On the back of monthly data, IP growth in the first half of the year stands at 15.6 percent year over year versus a decline of 18.6 percent in the first half of 2009. The 17.3 percent rise in manufacturing in the first half of the year should be seen a sign of strong recovery in the GDP. Our GDP growth expectation is somewhere between 8-7 percent. The most prominent recovery took place in the subsectors of textiles, machinery and equipments, electrical machineries and equipments and motor vehicles.
Despite these bright industrial figures, if we exclude calendar and seasonal effects, we see a month on month decline of 2.1 percent in IP, indicating the first negative reading of the year. Although the general IP picture confirms that the “recovery phase” of the manufacturing sector continues, a risk-free picture is not on the table.
Moreover, although growth in capacity utilization continues over 75 percent in the last month, having considered that both the consumer confidence and real sector confidence index is indecisive, some weakness in the manufacturing production in the second half of the year could be observed. In the period ahead, IP will walk away from the low base year effect which limited the year over year increases in the months to come.
Recent bad news, especially regarding Turkey’s leading trade partners, may hurt domestic consumption through “expectation channels” which might be an obstacle to growth.
In conclusion, it seems that the economy could achieve a 6-8 percent rate of growth in the second quarter of the year, which supports the market annual GDP call of 5-5.5 percent. Yet, growth might lose momentum in the third and the fourth quarters. A lasting output gap with a rosy inflation outlook (for now) supports the Turkish Central Bank’s goal of keeping policy rates low.
 Figure 1  Figure 2 |
