Though it is soon to judge, first signals for the third quarter imply that growth rate will not be substantially different from the first half.

Yesterday came another data reinforcing the signs that growth in second quarter will not be much different than the first. In June, industrial output picked up by 2.7 percent year-on-year. Focusing on three-month output figures in order to cast away monthly fluctuations, we see that year-on-year growth in industrial output was 2.8 percent in the first quarter and 3.4 percent in the second quarter.

Growth slows down

The pace of GDP growth has been decreasing continuously since the first half of 2011. As you might remember, growth rate in the first quarter was significantly lower than the potential growth rate. Excluding the artificial growth effect resulting from extensive importation of bar gold during 2011 and exportation during the first quarter of 2012, the rate stands at 2.6 percent. Also in the second quarter was Turkey a large net gold exporter. When growth rates are adjusted to gold exports, in other words when we assess the “headline” growth as we measure the “headline inflation”, we see that second quarter’s growth rate will be very close to that in the first quarter.

As the second quarter of 2012 has already ended, we have to start discussing the third quarter now. There are only a few figures for July, the first month of the third quarter. Let me talk about those that can give a hint about growth rate. First, the Turkish Exporters’ Assembly declared that exports (excluding gold) decreased year-on-year. Export volume decreased also in April this year. But it is necessary to note that since 2009; only in those two months did exports decrease. Second, the real sector confidence index released by the Central Bank weakened year-on-year and the downturn has been in place since October 2011.

Another important index that hints of turns in the economy is the composite leading indicators index released by the Central Bank. Six-month changes in this index are more important for purposes of estimating growth. From November 2011 to February 2012, the index signaled drops in the volume of economic activities. From March to May, there was a relative recovery. In June, however, the index showed a downturn. Also, please note that despite fluctuations, the index has been stagnant for some time now.

Though it is soon to judge, first signals for the third quarter imply that growth rate will not be substantially different from the first half. Of course this is an interim assessment.

This commentary was published in Radikal daily on 09.08.2012