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    Indicators of dual character

    Fatih Özatay, PhD01 November 2012 - Okunma Sayısı: 894


    The growth rate in the third quarter will most likely be below the unpleasing growth rate of the first half of the year.

    Foreign trade statistics for September were announced yesterday. Since December 2011, non-energy and non-gold imports have been decreasing year-on-year. The reason is quite obvious: growth rate has been significantly low and thus import requirement has been decreasing. The picture did not change in September, either: non-gold and non-energy exports decreased by 3.6 percent. The only difference is that the rate of decrease was smaller compared to previous months.

    On the other hand, non-gold exports increased significantly, by 9.2 percent year-on-year. This was the second largest increase so far in 2012. This is the first positive development about the export performance in September. Second, despite large year-on-year drops in July and August, non-gold exports increased at an impressive rate in September. The third positive sign is that working-day-adjusted figures also validate the large increase in exports.

    A sign of economic recovery?

    As you might note, I once again avoided using seasonally adjusted data. Otherwise, I would have concluded that exports decreased and imports increased month-on-month; a picture opposite two what I heralded above. I don’t believe that the seasonally adjusted figures draw a reliable picture for this case. Monthly volatilities in seasonally adjusted figures should be ignored on most occasions.

    Do the rise in non-gold exports and the moderating of the fall in non-energy and non-gold imports in September signal economic recovery? Of course, it would be funny to arrive at a conclusion based on a single observation. We have to assess a bunch of other indicators before answering this question. The previous commentary assessed the capacity utilization ratio for October: it does not give any implication of economic recovery let alone that for September.

    Low growth rate

    On the other hand, real sector confidence index for October reveals that the confidence in the economy enhanced year-on-year. Movements in the index value and the fluctuations in the private sector investment expenditures are correlated at a large degree. Besides, confidence index changes before investments, acting in a way as a leading indicator for investments. Yet, the October value of the real sector confidence index has a “dual” character. On the bright side, the index did not demonstrate a year-on-year decrease. On the negative side, the index value was the lowest of those for the last couple of months.

    The final conclusions in the light of these are: first, the growth rate in the third quarter will most likely be below the unsatisfactory growth rate recorded in the first half of the year. Second, the growth outlook did not seem to have changed in October. Still, this does not necessarily mean that things will not turn around soon. On 25th October, I talked about the conditions under which Turkish economy can recover. They were reasonable and probable. But, it is equally probable that Turkey fails to meet the necessary conditions.

    This commentary was published in Radikal daily on 01.11.2012