Türkiye’s industrial output expanded much more than expected in October, official data showed Tuesday, against expectations for a contraction amid a slowdown in some of the country’s main trade partners.
Seen as a preliminary indicator of growth, the industrial production index grew by 2.5% year-over-year in October, the Turkish Statistical Institute (TurkStat) said, extending its rise on an annual basis to the 28th month.
Industrial activity bounced back strongly after the initial coronavirus wave in April 2020 and has been expanding since then. But annual growth has slowed significantly since the summer, with demand declining due to the wider global slowdown.
Treasury and Finance Minister Nureddin Nebati hailed Türkiye’s strong run on both an annual and monthly basis in an environment marked by a slowdown in developed economies that are plagued by recession risks.
“While October has been a month in which production of intermediate goods, durable consumer goods and capital goods strengthened, the wheels continue to turn decisively in the industry within the framework of our policies that prioritize domestic production and exports,” Nebati wrote on Twitter after the data release.
The overall growth in October was driven by a 3.7% rise in manufacturing output. Meanwhile, the mining and quarrying production declined 7.4% on annual basis and the electricity, gas, steam and air conditioning output fell 4.8%.
Month-over-month, industrial output increased 2.4% on a calendar and seasonally adjusted basis, the TurkStat data showed, after a 1.6% drop in the prior month.
The government has endorsed low interest rates to boost exports, production, investment and create new jobs as part of an economic program, dubbed the Türkiye Economy Model, which aims to eventually lower inflation by flipping the country’s chronic current account deficit to a surplus.
Türkiye’s economic growth has remained buoyant but has been expected to have cooled down in the second half of this year. The gross domestic product (GDP) expanded by 3.9% in the July-September period, which meant Türkiye still had one of the best performances among G-20 countries.
To counter the expected slowdown, Türkiye’s central bank embarked on an easing cycle between August and November, slashing its policy rate by 500 basis points to 9%.
The bank justified the cuts by saying financial conditions must remain supportive to maintain the growth in industrial production.
Given the expected slowdown, economists expect full-year growth of 5%, according to surveys, after a strong first half of the year. Ankara expects a 5% growth this year and in 2023.
Nebati said the growth in the industrial output that he said came a day after the data showed the number of employed people rose by 229,000 to over 31.2 million in October “continues to show us the outcomes of the Türkiye Economy Model.”
Industry and Technology Minister Mustafa Varank cited an increase in high technology production, which he says has particularly been an important driver in October.
"The 11% monthly and 36.7% annual rates (of increase) in high technology manufacturing industry production have especially been very effective in increasing industrial production in October,” Varank told an event in Istanbul.
The median estimate in a Reuters poll of six institutions expected year-over-year growth of just 0.08% in the calendar-adjusted industrial production index. Four economists expected the index to expand as much as 1%, while two others expected a contraction of up to 1.1%.
The index expanded only 0.4% in September, indicating the impact of declining demand due to the global economic slowdown.
“Public circles expected industrial production to fall. Because there is a recession in Europe. We are heading toward a decrease in exports. But with the increase especially in high-tech production, our industrial production has been positive in October as well,” Varank said.
“The fact that this comes about with high-tech products is actually very important in terms of showing the transformation in our industry.”
One of the main drivers of Türkiye’s economic growth this year, exports hit record-high volumes throughout the first 11 months of 2022. Yet, a global slowdown has put a drag on foreign demand, notably among Türkiye’s largest trade partners, spearheaded by Europe.
Separate data from the statistical authority showed that retail sales and the total turnover index also surged in October.
Retail sales increased 9.5% year-over-year in October, the same as seen in the previous month.
Non-food sales, except automotive fuel, grew 11.8% on an annual basis and food, drinks and tobacco sales surged 10.8%, according to the data. Sales of automotive fuel rose 1.1%. Retail turnover climbed 133.6% in October versus the same month last year. Sales via mail orders jumped 160.5% on annual basis.
On a month-over-month basis, retail sales rose 1.4%, following a 1.2% gain in September.
The economy’s total turnover index jumped 124% year-over-year in October, the TurkStat data showed, driven by significant growth in the industry, construction, trade and services sectors.
The largest annual hike was 155.4% in the services sector, followed by trade at 125.9%. Turnover in the construction and industry sectors surged 113.7% and 112.1%, respectively.
Month-over-month, the total turnover index increased by 3.9%, according to the data.
