Macro Focus: High single or double digit level of economic growth probable in 3Q21

In September, IP decreased by 1.5% MoM, but increased by 8.9% YoY. According to the consensus, the third IP data set for 3Q21 was expected to increase by 10% YoY SA (YF – MoM: -3.6%, YoY:  +7.4%, Prior – Aug.21: +5.6% MoM, Sep.20: +8.1% YoY). Additionally, unadjusted IP increased by 8.8% YoY (Consensus: +9.5%, YF: +8.6%, Sep.20: +11.3%). In September, only mining and quarrying sector (after 3-month decreases) recorded a MoM increase whereas manufacturing (for 2nd time in last 3 months) and electricity, gas, steam (for 3rd time in last 4 months) sectors recorded decreases. On a monthly basis, all main industry groups record decreases, except durable goods. 3-month averages point a general momentum loss on main industry groups.

Manufacturing sector decreased by 1.6% MoM, but increased by  9.7% YoY.  9 of 24 subsectors under manufacturing recorded monthly increases. The highest monthly increases were seen on manufacture of other transport equipment (+9.9%), manufacture of basic pharmeceuticals (+6.2%) and manufacture of leather products (+5%) whereas the highest monthly decreases were seen on manufacture of motor vehicles (-14.5%), printing and reproduction of recorded media (-10.2%) and manufacture of computer, electronic and optical products (-9.4%). We could say that difficulties on supply chains (especially semiconductor shortage) and cost side pressures due to the weak Lira currency, high level of commodity prices and transportation costs continued to put a downward pressure on the manufacturing sector.

High single or double-digit level of economic growth could be seen in Q3. In Q3, IP increased by 9% and 10.8% compared to same period of last year in unadjusted and calendar adjusted series, respectively. Additionally, QoQ increase was 1.6%. In Q2, IP data recorded 1.5% of QoQ growth whereas increased by 40.4% YoY in unadjusted data and 41.2% YoY in calendar adjusted data when the economic growth was +0.9% QoQ and +21.7% YoY. Hence, IP data for Q3 indicate that high single or double-digit level of economic growth figures seems possible in 3Q21 in YoY basis.  Other leading figures and high frequency data also confirm this outlook. We should also note that service and related sectors gave positive contribution to the economic growth figure of Q3 due to acceleration on domestic vaccination rollout, better tourism performance and reopening of the economy. Economic growth was 14.3% in 1H21 compared to 1H20. Under the light of the recent realizations and trends, we expect that the YoY economic growth figure in Q3 could continue be at strong levels but start to slowdown through or below the potential levels in Q4. Accordingly, our economic growth rate estimate for 2021 is at 9.9%. Turkey’s 3Q21 GDP data would be announced on November 30 whereas next and first IP data set (October) for 4Q21 to be announced on December 13.


Y.F. Securities Research