July IP: When probabilities don’t fail You!

Turkish Economy: July IP

When probabilities don’t fail You!

Industrial Production increased by 2,3% MoM versus a market expectation of a 0,8% increase (seasonally and working day adjusted). When adjusted for working days the index rose by 14,5% YoY.

Key Take-aways:

  • After two consecutive declines – a rare occasion for IP – odds showed a 83% probability for a positive value in July which was confirmed by actual data today (cover graph).
  • June decline could be attributed to
    • calendar day effect which was corrected in July,
    • as well as a transitory pull-back in IP worldwide.
  • Strong gain in annual statistics to be considered as a base effect illusion due to developments in July last year.
  • Important that third quarter started on a strong footing almost securing 5+% GDP growth for this year.
  • July numbers may serve as a shield against regular August lull which could be corrected again in September with another strong data.

Global Production

We are tracking consumption and production on a progressive trend worldwide (Figure 1).

1. Relatively low fuel prices,
2. Solid employment gains, and
3. Accommodative financial conditions

all support household budgets. That strong consumption demand translates into better profit margins. Reflation story actually seems intact with metal prices gaining about 20% in last three months. Combined with ascending producer prices corporates find themselves in a sweet spot. Almost all stock exchange indices hover at top levels. As a consequence such an environment keeps production facilities running globally. In June we have observed some slowdown in IP statistics which deemed to be transitory as expected.


Turkish industries integrated themselves very successfully to the global value chain. Automotive sector comes forward in this sense. Supportive global environment provides fuel to Turkish manufacturing. In today’s data we have seen external demand sensitive intermediate goods production rising faster than headline figure 2,7% MoM.

Today’s strong start to third quarter almost secured 5+% growth trajectory of the economy. Turkish IP currently runs above its long term trend (Figure 2).