Turkey’s industrial production expanded 7.6% year-over-year in January, data showed on Friday, rising for the 19th consecutive month.

The reading came in less than a forecast of 9.7% and cooled from the six-month high growth in December due to disruptions in some utilities.

Year-over-year growth, however, has remained positive since coronavirus measures were eased in 2020.

Month-over-month, industrial output dropped 2.4% in January on a calendar and seasonally adjusted basis, the Turkish Statistical Institute (TurkStat) said.

Contraction had been expected due to electricity and natural gas cuts at industrial facilities stemming from a technical failure in Iran. Tens of thousands of factories were forced to curb production.

"This effect at the end of January can be expected to be reflected in the following months due to the difficulties in global energy supply and costs," says Enver Erkan, a chief economist at Tera Yatırım.

The median estimate in the Reuters poll of seven institutions estimated growth of 9.7% in January. Forecasts ranged between 7.0% and 12.1%.

All sub-indexes increased in the month, with the mining and quarrying surging the most, the TurkStat said in a statement.

The mining and quarrying index climbed 8.3% year-over-year while the manufacturing index went up by 7.7%.

The electricity, gas, steam and air conditioning supply index increased by 5.6% in the same period, the data showed.

On monthly basis, an 11.2% jump in the mining and quarrying index was not enough to offset the fall as manufacturing, and electricity, gas, steam and air conditioning supply indexes decreased by 3.1% and 1.6%, respectively.

In April of 2020, output dropped more than 31% in the face of the initial coronavirus wave. It has since made a strong recovery because subsequent measures largely skirted the manufacturing sector, and most remaining restrictions were lifted in July of last year.

Turkey’s economy bounced back from the COVID-19 pandemic to grow 11% last year, its highest rate in a decade. The gross domestic product (GDP) grew 9.1% year-over-year in the fourth quarter.

But a depreciation in the Turkish lira sent inflation soaring via import prices. The inflation jumped to 54% in February, while the fallout from Russia’s invasion of Ukraine is also clouding the outlook.

“In particular, we will follow the balances created by the Russian crisis in terms of the production speed and costs of the industry,” Erkan said.

He noted that the leading indicators, especially the Purchasing Managers Index (PMI) for the manufacturing sector signaled that the positive trend in manufacturing continues but said that the growth momentum of January and February points to a slowdown.

“We think that together with the negative impact of the Russian crisis on the export orders side, the cooling in foreign demand will shift the production curve down. Therefore, before the first half of the year, there is a possibility that industrial production will contract on an annual basis.”