In May, industrial output picked up by 5.9 percent year-on-year.

Have the period of slow growth that started in the first quarter of 2011 ended in the first quarter of 2012? If yes, will the growth performance in the second quarter differ greatly? I have been trying to answer these questions for some time now. This is why a number of recent commentaries focused on the assessment of latest figures. This commentary too is one of those. Yesterday, another data critical for the answer of above questions was announced. In May, industrial output picked up by 5.9 percent year-on-year.

If we did not know other statistics for May and June, we could have concluded that the relatively strong increase in industrial output in May suggests that slow growth ended after the first quarter and was replaced with a moderate recovery process. But no other indicator reveals a considerable recovery, except credit figures. And the rise in the credit volume is partially seasonal (I am talking about three-week average figures).

Hence, we need to take a closer look at industrial output figures. The following perspective might be useful: were there significant fluctuations in annual pace of industrial output growth index during the phase of slow growth that started in the first quarter of 2011? Or did growth decrease in uniform?

The correct answer is the former. For example, annual pace of growth was 7 percent in July 2011, followed by 3.8 percent in August and 12.1 percent in September. The rate decreased to 1.5 percent in January 2012 and reached 4.4 percent in February, followed by a drop to 2.6 percent in March. In short, annual pace of industrial output growth fluctuated considerably. Of course this picture does not necessarily imply that growth rate will diminish next month. As I said before, however, assessed together with other data for the last months, I doubt that the strong industrial output growth in May signals the start of a recovery process.

We can focus on three-month figures to cast away monthly fluctuations. Figure 1 shows three-month movements. As seen, there was a uniform drop in industrial output growth between first quarters of 2011 and 2012. Percentage growth rates were 14.4, 8.0, 7.6, 6.5 and 2.8, respectively. On the other hand, total industrial output in April and May was 3.2 percent higher compared to April-May 2011. From this angle, though the phase of slow growth came to an end by the first quarter of the year, there is no significant recovery in place in the second quarter. In other words, the second quarter is hardly different from the first. All we can expect is a slightly higher growth rate; not relatively or evidently. Also, I would like to stress that the statement on the phase of slow growth coming to an end after the first quarter of 2012 applies unless things that worse in Europe.

This commentary was published in Radikal daily on 10.07.2012