Research Notes

Consumer prices rose by 2.37% in July, once again below market consensus (2.6%) and our expectation (4%), which led to an annual inflation of 79.6%. The downside surprise was due to lower than expected food prices, particularly unprocessed foodstuff, which is somewhat conflicting with other regional price indexes and observed data.

Turkish economy grew by 9.1% y/y in 4Q21, which resulted in a full year growth rate of 11% in 2021. Russia’s invasion of Ukraine and sanctions from the US, EU and other countries are clear additional downside risks on the growth outlook. We maintain our 2022 GDP growth forecast at 3.5% for now.

Consumer prices increased by 11.1% in January parallel to expectations and resulted in an annual inflation of 48.7% up from 36.1% the month before. We expect consumer inflation to remain around 55% in 2Q and 3Q before falling down to 35% at the end of the year, helped by the favorable base impact in December.

Industrial Production (IP) surprised on the upside, increasing 14.4% yoy in calendar adjusted terms (vs market expectation of 10.8%). IP also rose by 1.6% mom, resulting in a 4.3% quarter-on-quarter growth in 4Q21 (vs 2.0% qoq in 3Q21). Both retail sales and turnover index in the services sector suggest that consumption remains solid. Our Big Data demand proxies and other high frequency indicators also confirm a robust momentum despite recent energy supply shortages in late January. After forecasting a yearly growth rate of near 9% for December (implying 2.5% qoq growth in 4Q21), our monthly GDP indicator nowcasts a deceleration near 7% for February (33% of info).

Industrial Production (IP) increased by 11.4% yoy in calendar adj. terms (14.7% yoy in raw series) in November lower than the market expectation of 8%. Thus confirmed the continuation of strong economic activity given the acceleration in monthly growth of 3.3%, which was 0.7% in October.

Consumer prices increased by 2.39% in October surprisingly lower than expectations, resulting in an annual inflation of 19.89% up from 19.58% the month before. Considering global supply side restrictions, currency depreciation and cost push factors accompanied with still robust demand, risks remain clearly on the upside for inflation outlook.

Industrial Production (IP) grew higher than expectations by 13.8% yoy in calendar adjusted terms and 19.9% yoy in raw series in August. Monthly figure gave a correction by increasing 5.4% mom in August after the -3.4% mom contraction with the holiday effects in July. All sub-sectors gave positive contributions where capital goods production took the lead.

Consumer prices increased by 1.25% in September parallel to market expectations, resulting in an annual inflation of 19.58% up from 19.25% the month before. In contrast with expectations, core prices inflation surprised on the upside on the back of strengthening basic and durable goods prices which were weaker in the previous two months. Also, services prices continued to increase across-the-board.

Industrial Production (IP) grew remarkably lower than expectations by 8.7% yoy in calendar adjusted terms (vs. 15.2% consensus) in July, whereas it contracted by 2.3% yoy in raw series. The month-on-month figure also implied a large negative contraction of 4.2%, showing weaknesses across-the-board but especially in capital goods production.

Consumer prices increased by 1.12% mom and 19.25% yoy in August, again being realized above expectations on the back of a higher than expected food inflation.

Turkish economy grew by 21.7% in yearly terms in 2Q21, resulting in a growth rate of 14.3% in the first half of the year. Though, the quarter-on-quarter growth rate moderated to 0.9% after growing by 2.2% in 1Q21.