Turkish industrial output slides, growth forecasts lowered

Turkish industrial production shrank 3.1 percent year-on-year in September, official data showed on Tuesday, prompting economists to cut their growth forecasts and adding to concern about an outlook marred by political uncertainty. Alongside the grim economic data, investor sentiment towards Turkey was hit by a failed July 15 coup and a ratings downgrade, pushing the lira to a series of record lows against the dollar.
Growth slowed to 3.1 percent year-on-year in the second quarter and economists said the latest data pointed to quarterly contraction in the July-September period. "The underlying trend in the economy is clearly one of weakness," said William Jackson, an economist at Capital Economics in London, in emailed comments.
"It seems highly likely that overall GDP contracted in (quarter-on-quarter) terms in Q3." Month-on-month, industrial output dropped 3.8 percent in September on a calendar- and seasonally adjusted basis, the Turkish Statistics Institute said. It was the first contraction in quarterly industrial output since the third quarter of 2009. Jackson said a recent upturn in business surveys suggests the slide in September was a temporary blip. One explanation pointed to a return to more normal output levels after a sharp rise in August, resulting from disruptions in July due to a failed coup. The manufacturing Purchasing Managers' Index (PMI) rose to 49.8 in October from 48.3 in September, hitting its highest level in eight months as business conditions came close to stabilising.
DOWNWARD REVISIONS On the back of the latest data, QNB Finansbank revised its 2016 economic growth forecast down to 2.1 percent from 3 percent and lowered its 2017 forecast by 0.5 points to 3 percent, its chief economist, Gokce Celik, said.
It forecast 2-percent third-quarter GDP contraction from the previous quarter, implying 0.7 percent contraction year-on-year. "Early indicators for the final quarter are also not pointing to a dramatic pick up in economic activity," said Deniz Invest chief economist Ozlem Derici, revising down its GDP forecast to 2.3 percent from 3.1 percent.
The output data showed broad based contraction, with durable consumer goods production shrinking 9.5 percent year-on-year an non-durable consumer goods output down 6.5 percent. The hit a fresh low of 3.1850 on Tuesday and stood at 3.1768 at 1030 GMT.