Macro Focus: IP, June 2021: IP figures indicate a strong growth in Q2

In June, IP increased by 2.3% MoM and 23.9% on a YoY. According to the consensus, the first IP data set for 2Q21 was expected to increase by 21.1% YoY (YF: +20.3%, May.21: +40.7%, Jun.20: +0.3%). Additionally, unadjusted IP increased by 23.7% YoY (Jun.20: +17.7%). To recall, the most negative economic impacts of the pandemic in Turkey were seen in in 2Q20. Hence, this condition leads to a strong positive basis for YoY figures. Additionally, recent eases on COVID-19 measurements started in June. Therefore, this could be seen as an important driver of MoM increase.  On a monthly basis, all main industry groups except energy recorded increases whereas according to 3-month average figures all main industry groups recorded positive changes in QoQ basis.

Manufacturing sector expanded by 2.6% MoM and recorded 24.8% YoY increase.  17 of 24 subsectors under manufacturing recorded monthly increases. The highest positive contributions came from the manufacture of food products (MoM contr.: +0.9pps) manufacture of transport equipment (MoM contr.: +0.5pps) and, manufacture of textiles (MoM contr.: +0.4pps) while the highest negative contributions came from manufacture of fabricated metal products (MoM contr.: -0.1pps), manufacture of pharmaceuticals (MoM contr.: -0.1pps) and manufacture of paper and paper products (MoM contr.: -0.1pps).


IP figures indicate a strong YoY economic growth in 2Q21. This was the last IP data of Q2. In 2Q21, unadjusted IP data recorded 40.3% YoY (1Q21: +11.3% YoY, 2Q20: -16.6% YoY) increase while calendar adjusted IP data increased by 24.3% YoY (1Q21: +12.5% Yoy, 2Q20: -16.7% YoY). Additionally, seasonal and calendar adjusted IP growth continued to stay at the positive levels by 1.6% QoQ in 2Q21 (1Q21: +2.7%, 2Q20: -19.4%) despite some momentum loss. In the light of these data, Turkey’s economic growth could be around 21% YoY (1Q21: +7%, 2Q20: -10.3%) in Q2, according to our first calculations. Despite, the most important driver of these strong YoY figures was the positive base effect, we should also note that the economic activity performed better than the expectations in 1H21. Leading and high frequency indicators pointed that the economic activity is still strong in early 2H21. Reopenning of the economy and acceleration of vaccination rollout since June could be seen as the key drivers of this outlook. On the other hand, we expect that the economic growth outlook could be more moderate in 2H20 due to the lower positive basis, ongoing pandemic related uncertainties, potential negative impacts of the recent fires on tourism, ongoing needs for tight monetary policy and economic stabilization. Accordingly, we increase our annual economic growth estimate for 2021 from 5.5% to 6.5% after the last IP data. Also, we should note that the risks are still upward on our estimate. Pandemic related developments and tightness level of the financial conditions would continue to be the key drivers of the economic activity. Turkey’s 2Q21 GDP data would be announced on Sep.1 and the first IP data set (July) for 3Q21 to be announced on Sep.13.


Source: Y. F. Securities Research