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statistics office TUIK showed on August 16. The figures showed the Turkish consumer is still on his knees in the wake of the economic turmoil triggered by last year’s currency crisis. The latest negative figure extends the longest streak of decline seen since the global financial crisis a decade ago. The market consensus was that the June contraction would be limited to around 1.01% y/y, according to a Reuters poll. On a monthly basis, the gauge fell 3.7%.
Turkey’s industrial production has now contracted on an annual basis in each month since September 2018. The country slipped into a recession following the Turkish lira (TRY) crunch, with the economy contracting 2.6% in the first quarter of this year following the 3% drop recorded in the last quarter of 2018. Economic activity has remained slow since.
The GDP growth figures for Q2 2019 are due out on September 2.
"Serves as a reminder" “The 3.7% m/m fall in Turkish industrial production in June adds to the evidence that GDP growth in Q2 was much weaker than in Q1. Leading indicators suggest that the scale of the fall in output was probably a blip, rather than the start of a deeper downturn. But it serves as a reminder that Turkey’s recovery from the recent recession will be slow and bumpy,” William Jackson of Capital Economics said on August 16 in a research note entitled “Industry collapses, although surveys point to better Q3”.
Turkey’s manufacturing PMI was negative for a sixteenth straight month in July. The index fell to 46.7 from 47.9 in June (anything below 50 denotes a contraction). However, according to Jackson, closer inspection of the PMI suggests that the weakness in June is unlikely to be sustained. He said: “It points to a slower pace of contraction in year-on-year terms in the coming months, which is consistent with rises in production in month-on-month terms. This has been helped by a rise in new orders (both domestic and external). So while the June figure is alarming, at this stage it looks like a blip more than anything else.” Capital Economics also observed that despite the drop in output in June, industrial production still rose over Q2 as a whole, by 0.5% q/q, thanks to stronger output earlier in the quarter. But that was much weaker than the 1.6% q/q expansion seen in Q1, it said, offering a pointer that GDP growth in Q2 was much softer than it was in Q1.
The accuracy of certain TUIK data, meanwhile, remains under question
following staff and methodology changes introduced in the wake of the balance of payments crisis. Drawing any conclusions on Turkey’s trajectory based on official data might therefore place the analyst on a precarious path. Demonstrating Turkey’s economic blues are far from over, the Turkish auto market collapsed in July. Vehicle sales plunged 66% on an annual basis. An examination of the latest indications for Turkey’s white goods market, which saw a 9% decline in sales in the first half of this year, leads to the conclusion that it may contract 15% as a whole in 2019.
Choice acquisitions. Given how many Turkish companies have fallen into dire straits since the country’s economic boom came to a shuddering halt, foreign investors are on the lookout for some choice acquisitions.
US-based AA Metals has acquired a 100% stake in Turkish aluminum sheets producer Teknik Aluminyum, Hurriyet reported on July 26. Teknik Aluminyum was under bankruptcy protection. AA has taken over the company’s TRY400mn worth of debt in exchange for sole ownership. The transaction goes down as the first sale of a Turkish company under bankruptcy protection since the currency meltdown took Turkey off the rails. Teknik Aluminyum was established in 1960 as the first local aluminum sheets producer. It was among Turkey’s top 100 exporters in 2016.
The government has brought in legislation to prevent waves of bankruptcy protection orders, while parliament lately approved legislation on restructuring loans. Turkish lenders, along with the finance ministry, are on the way to acquiring stakes in private companies. The
14 TURKEY Country Report September 2019 www.intellinews.com