June IP: Calendars tend to leap inherently

Turkish Economy: June IP

Calendars tend to leap inherently

Industrial Production decreased by 0,4% MoM versus a market expectation of a 0,4% increase (seasonally and working day adjusted). When adjusted for working days the index rose by 3,4% YoY.

Key Take-aways:

  • Despite the negative sign in today’s figures, industrial production continues with its upwards accent.
  • In the month of May there were 21 total working days with;
    • May 1st observed as labor day, and
    • May 19th observed as youth day.
  • In the month of June which coincided with Ramadan fasting season there was a total of 20 working days;
    • When only June 26th & 27th observed as holidays.
  • Ramadan is traditionally a slower period in terms of activity, and working day adjustment seems to have failed in offsetting the effect.
  • The index is up by 1,7% QoQ in the second quarter where as it was up by just 1,3% QoQ in first quarter.
  • Other indicators such as credit growth, domestic appliance sales, aviation, and tourism are in line with faster economic activity in the second quarter.

Calendar Adjustment

This year Ramadan fasting season started on May 27th and went thru June 25th mostly covering the month of June. Additionally Turkish citizens prefer combining holidays with their vacation time. Probably many citizens preferred taking the last week of June as a vacation time. Because that weekend Antalya airport, a popular tourist destination, broke records. Actually weather conditions were ideal this year for fasting. Although days are longer in June, lukewarm weather offsetted the duration effect in fasting. Research indicates that the farther a country lies from Equator, the stronger Ramadan effect will be felt. Therefore in summer months Ramadan relates to slower economic activity. And it’s quite normal to see low figure in statistics. On certain months calendar adjustment due to a 3-day long Eid holidays offsets this certain effect. However this year one day of the Eid fell on a Sunday. And following the month of May which already has two days observed as national holidays did not bode well for statistical working day adjustment. Last year the month of June had 22 total working days. Despite the loss of 2 days this year the index is up by 3,4% YoY in working day adjusted terms which confirms our view that upward trend in industrial production endures (Figure 1).


Regarding the evolution of monthly changes, today’s -0,4% is closer to zero-line compared to last month’s -1,4%. Chances are high that next month the index will cross the zero-line recording a positive outcome (Figure 2).

We have argued before that the strong gain in April (+2,2% MoM) secured any Ramadan related slowdown. That argument came out to be true that in the second quarter industrial production is up by 1,7% QoQ. In the first quarter the index was up by 1,3%. Other indicators such as domestic appliance sales, aviation, tourism all indicate a faster pace of economic activity in the second quarter.