In the third quarter of 2012, Turkey’s economy grew by 1.6 percent. It appears that the fourth quarter will not be worse than the third in terms of growth performance.

The US has reached a decision to avoid the fiscal cliff, which relieved the world largely if not completely. Not completely, because some issues delayed for two months might lead to new debates. Switching to domestic matters, capacity utilization rate (CUR) decreased year-on-year. I ignore the seasonally adjusted CUR figures as they might be misleading. I want to explain why in the end in order to avoid technical details for now.

As can be expected, there is a close relationship between (unadjusted) CUR figures and industrial output. The figure below shows the year-on-year percentage change in both variables. As seen, both move in the same direction excluding small fluctuations. Annual CUR growth rates have been decreasing for some time now. Then, can we conclude that industrial output either increased slightly or decreased in November? No, we cannot, as temporary deviations from the main trend are always probable.

Unlike 2012, there was a long holiday in November 2011 and the number of days worked being higher in November 2012 might have enabled a substantial increase in industrial output. If it has, would this imply a remarkable improvement in the economic activity level? No, it would not. First, CUR declined year-on-year in not only November but also December. Second, in December, real sector confidence index fell below the critical threshold of 100. Although the real sector confidence increased slightly year-on-year, it has been in a constant decline since April.

In October, both non-gold exports and non-gold and non-energy imports decreased year-on-year while they increased significantly in November. If we use three-month averages in order to remove the working day effect, we see that non-gold and non-energy imports decreased year-on-year since the beginning of 2012 until November, when it increased year-on-year by 0.8 percent. Similarly, the strongest increase in non-gold exports throughout 2012 (concerning three-month average figures) was recorded in November, with 10.1 percent.

The statistics might seem to be complex, but they are not. In the third quarter of 2012, Turkey’s economy grew by 1.6 percent. It appears that the fourth quarter will not be worse than the third in terms of growth performance. Given that the expected growth for 2013 is 4 percent, figures match.

A note: seasonally adjusted CUR figures are misleading for two reasons: first, the original series are available since 2007 and the number of observations is insufficient for the successful implementation of adjustment techniques. You cannot make generalizations relying on the series composed of six years. Second, simple preliminary tests that ignore this fact provide only “trace” amount of evidence for any seasonal movement. The Central Bank has been releasing the seasonally adjusted data, but I think it would be useful to review this policy.

Figure 1. Industrial output and CUR: January 2008–December 2012 (annual % changes).

This commentary was published in Radikal daily on 03.01.2013