Turkey’s Industrial Output Slumps

By Yeliz Candemir

ISTANBUL — Turkey’s industrial output fell sharply in December, disappointing markets and indicating that the country’s economy may have undershot the government’s projected 3.2% expansion last year.

The contraction in December was greater than expected, economists said. Data from the state statistics agency, TUIK, on Friday showed Turkey’s industrial production fell 3.8% on an annual basis in December, compared with an annual rise of 11.3% in November.

Some economists said the downbeat reading wouldn’t necessarily spur the central bank to take action promptly, as industrial output had been very volatile during the second half of last year.

“The data indicate that 2012 gross domestic product growth is likely to stay below 3%,” said Gulay Elif Girgin, chief economist with Ata Invest in Istanbul.

Last month, the central bank cut its overnight borrowing rate to 4.75% from 5% and its overnight lending rate to 8.75% from 9%, in a move to curb the lira’s strength and rein in excessive capital inflows, while holding its one-week benchmark interest rate steady at 5.5%.

“From a monetary-policy perspective, a stronger industrial-production performance, along with the recent pickup in loan growth, could make the central bank much more cautious. This combination would urge the bank to tighten liquidity much earlier than [it] would otherwise,” said Yarkin Cebeci, an economist at J.P. Morgan Chase JPM +0.83% & Co. in Istanbul. “With this weakness in industrial output, the bank would now be happy to wait for a few more data points before getting more serious on its policy reaction.”

In a bid to stimulate economic growth, Turkey’s central bank eased its monetary policy during the second half of 2012 and reduced borrowing rates for banks to 5.5% by the end of the year from a peak of 12% earlier in the year.

The central bank had forecast that economic growth would begin to pick up significantly in the fourth quarter after the economy slowed to 1.6% growth in the third quarter, the weakest pace since 2009.

Turkey’s government expects 4% growth this year from an estimated 3.2% annual expansion last year. Turkey’s 2012 gross domestic product data will be disclosed on April 1.

Digging into Friday’s data, a breakdown showed sharp falls in many sectors. A 10.4% decline in mining output provided the largest drop in industrial output, while manufacturing output fell 3.6% and electricity output and distribution dropped 2.9%.

via Turkey’s Industrial Output Slumps – Emerging Europe Real Time – WSJ.