Macro Focus: IP, March 2021: Stronger course than expected in Q1

In March, IP increased by 0.7% MoM and 16.6% on a YoY. According to the consensus, the third IP data set for 1Q21 was expected to increase by 13.4% YoY (YF: +12.3%, Feb.21: +8.9%, Mar.20: -1.6%). Additionally,  unadjusted IP increased by 19.9% YoY (MAR.20: -0.9%). On a monthly basis, intermediate goods, energy and non-durables recorded increases whereas durables and capital goods contracted. Intermediate goods recorded increases in 10 of 11 months. On the other hand, we should note that the recovery trend on durable and capital goods started to lose steam in monthly basis. They recorded MoM decreases in the last 2 of 3 months and declined to contractionary area according to 3-month average figures despite the YoY figures gave a strong outlook due to the positive basis.


Manufacturing sector recorded increases of 0.3% MoM and 17.2% of YoY.  13 of 24 subsectors under manufacturing recorded monthly increases. The highest positive contributions came from the manufacture of textiles (MoM contr.: +0.3pps) manufacture of food products (MoM contr.: +0.2pps) and, repair and installation of machinery and equipment (MoM contr.: +0.1pps) while the highest negative contributions came from manufacture other transport equipment (MoM contr.: -0.5pps), manufacture of electrical equipment (MoM contr.: -0.1pps) and manufacture of motor vehicles, trailers and semi-trailers (MoM contr.: -0.1pps).


IP figures indicate a quite strong YoY economic growth data for 1Q21. IP, which is one of the most important leading indicator of the economic growth, indicated that the strong course of the economic activity continued in 1Q21 in yearly basis. Additionally, positive basis due to the pandemic driven slowdown in 1Q20 is an important factor on YoY figures. On the other hand, we should note that monthly figures and other leading indicators have started to point a momentum loss recently. Nonetheless, YoY IP growth was 12.3% (1Q20: +4.5%, 4Q20: +10.2%) in calendar adjusted figures and 11.1% (1Q20: +5.7%, 4Q20: +10.2%) in unadjusted figures in 1Q21 whereas calendar and seasonally adjust figure pointed around 2.6% of QoQ growth (4Q20: +4.7%, 1Q20: +0.9%). According to our first calculations under the light of these figures, YoY economic growth could be around 7-8% in 1Q21 (1Q20: +4.5%, 4Q20: +5.9%). We should also state that YoY growth figures could be at double-digit levels in 2Q21 due to strong positive basis effect despite the recent momentum loss. Economic growth outlook could be much more moderate in 2H20 due to the lower positive basis, ongoing pandemic related difficulties and needs of tight monetary policy and economic stabilization. Accordingly, we increase our our annual economic growth estimate for 2021 is from 4.8% to 5.3%. Pandemic related developments and tightness level of the financial conditions would continue to be the key drivers of the economic activity. Turkey’s 1Q21 GDP data would be announced on May 31 and third and the first IP data set (April) for 2Q21 to be announced on June 11.


Source: Y. F. Securities Research