According to TURKSTAT, seasonal and calendar adjusted industrial production increased by 1.1% MoM in May, compared to -0.9% in April (Dinamik: +1.2%). Calendar adjusted industrial production fell 0.2% YoY compared to -1.2% in April (expected: +0.8%, Dinamik: -0.2%). According to unadjusted data, industrial production increased by 11.3% compared to the same period of the previous year. Thus, the annual change in quarterly averages in industrial production was +0.6% compared to the change in unadjusted indices.

In the details of the index, it is seen that 7 out of 12 sub-sectors contracted. Monthly increases in high-tech products and durable consumer goods are positive details. In this area, there is a front-loaded demand effect brought about by the inflationary environment. In general; The slowdown in industrial production since 2021 continues. The fluctuating course on a monthly basis also indicates a non-continuous situation. Therefore, the not so good performance in the industry is also seen in the May data covering 2Q23.

When we look at the details; While mining and quarrying increased by 2.4% on a monthly basis, it contracted by 7.1% on an annual basis. While an increase of 0.9% was observed in the manufacturing industry on a monthly basis, there was an increase of 0.6% on an annual basis. In the electricity, gas and steam group, there was an increase of 2.4% on a monthly basis and a contraction of 1.3% on an annual basis. On a monthly basis, durable goods increased by 4.6%, capital goods by 2%, energy by 1.5% and intermediate goods by 1%, while non-durable consumption goods decreased by 0.5%. Looking at the annual changes in the related items; capital goods increased by 18.1% and durable consumer goods increased by 11.8%; energy decreased by 5.7%, intermediate goods decreased by 5.5% and non-durable consumer goods decreased by 1.2%. High-tech goods groups increased by 12.6% on a monthly basis, while the medium-high technology sector decreased by 0.6% on a monthly basis.

Industrial Production, 3-month moving average, annual % change Source: TurkStat, Dinamik Yatırım

While the current account deficit was 7.9 billion dollars in May, it reached 60 billion dollars on an annualized basis. This indicates a high current account deficit situation above the sustainable level. It is obvious that if TL gains in value, exports will be adversely affected. Therefore, we will be faced with a growth composition subject to inflationary pressures. The progress in external demand is not very supportive as the recovery in Europe is fragile. Since most of the exports come from the manufacturing industry, weakness in this area also means weakness on the production side.

Kaynak Dinamik Yatırım- Enver Erkan