Last year, we have observed strong growth momentum in manufacturing. Many indicators turned the year at their cycle highs. Take Turkish industrial production. The index kept herself at above-trend levels during most of the year (“Resisting The Mean-Reversion”, December 8th, 2017).
For economic variables, stationarity is a key feature. Which basically means “mean-reversion” (around zero). The PMIs announced earlier today fell slightly in line with our expectations. In a similar fashion we have observed consumer confidence pulling back slightly, yesterday. These indicators are called “diffusion-indices”. Which tend to be in stationary form by default. It is not realistic to assume uninterrupted gains in diffusion indices. Today’s levels – well above 50-treshold – indicate the strength of European economic activity. Probably what we have seen and going to see in coming months is nothing but “mean-reversion”. Global Economy appears to fare in healthy fashion.
In coming months we may see Turkish industrial production reverting to her mean, as well.