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    Is the second quarter different from the first?

    Fatih Özatay, PhD19 June 2012 - Okunma Sayısı: 989


    It would not be a surprise if Q1 growth falls below 2 percent. More importantly, figures imply that Q2 growth might not be any different, either.

    Gross domestic product (GDP) for the first quarter will be announced in early July. GDP growth rate was recorded at an impressive 11.9 percent in the first quarter of 2011. Than the rate decreased steadily, finally arriving at 5.2 percent in quarter four. A much lower GDP growth rate is expected for 2012 quarter one. The second quarter of the year is about to end. I evaluated the available data during preceding commentaries. Today I want to discuss what those statistics imply for GDP growth in the first half of the year.

    We have statistics for employment for the first quarter, industrial output for the first four months and survey results and credit data for the first five months of 2012. According to these, unemployment rate remained constant between October 2011 and March 2012. Industrial output growth decreased steadily during the first four months of the year. Working-day adjusted index value indicates that industrial output growth rate slightly increased year-on-year by April. Still, the result doesn’t change: industrial output growth showed a downwards trend during the first four months of 2012. Indeed, import figures are in harmony with employment and industrial output figures. Pace of growth in non-energy imports have been falling down since September 2011. And annual growth rates have been in the negatives since January, indicating an actual drop in imports.

    Of course these all are reactions to foreign and domestic demand dynamics. Fluctuations in domestic and foreign demand are reflected on production and thus on imports and employment. Therefore, it is necessary to evaluate foreign and domestic demand dynamics, as well. Exports in Euro terms constitute almost half of total exports. Three-month cumulative figures for exports in Euro terms show that annual growth rate decreased at a constant rate from September 2011 to February. Figures for March and April demonstrate a modest recovery. But this movement is significantly weak compared to the first half of 2011 and its sustainability is questionable given the current milieu in Europe. Exports in Dollars (monthly figures and three-month cumulative figures) on the other hand have been increasing at a quite rapid pace though annual growth rates are still lower compared to those recorded during the second half of 2011.

    Chief among determinants of domestic demand is credit volume, which had grown impressively during the first half of 2011. Growth rates were significantly low during the last quarter of 2011 and the first quarter of 2012. Consumer loans in particular grew at par with inflation rate, showing no real growth. The latest credit data available is for the week ending on June 1st. Between the beginning of April and June 1st, annual credit growth rate started to rise again.

    These all suggest that annual growth rate in 2012 quarter one will be much lower than the rate recorded in the previous quarter. For instance, it would not be a surprise if Q1 growth falls below 2 percent. More importantly, figures imply that Q2 growth might not be any different, either. At first glance, the upwards trend in credit growth as of April might give the implication that growth performance in Q2 will be different from that in Q1. But a deeper look proves this presumption wrong, for two reasons: first, we must expect a certain delay in the translation of the rise in credit growth into a recovery in industrial output via investment and consumption. Second one is about the movements in the leading indicators released by the Central Bank, which I will address on Thursday.

    This commentary was published in Radikal daily on 19.06.2012