With the industrial output growth in February, however, those signaling the start of a moderate recovery are stronger now.

The most popular question lately is whether or not the economy started recovering in the last quarter. Yesterday another relevant piece of information was released: industrial output figures for February. I do not rely on seasonally and working day adjusted figures except for certain occasions. I will address the reason in detail next time if the agenda allows. I am interested rather in the year-on-year changes in industrial output, and hence I will examine the working day adjusted figures this time.

In February, working day adjusted industrial output increased by 4.4 percent. When the figures were released yesterday, a confusion occurred, as it generally does due to excessive information. The new method of data release also contributed. Annual output growth based on unadjusted data was only 1.6 percent. But February had 28 days this year and 29 days in 2012. One working day can cause such difference. Anyway, I will be using the working day adjusted figures.

Average industrial output in January and February (with working day adjusted figures) was 3.2 percent higher in 2013 than in 2012. This is substantially higher than the rate in the last quarter of 2012 but lower than that in the second quarter. We have been receiving mixed signals as to whether recovery has started in the first quarter. The available data implied that the recovery, if there was any, was moderate. The industrial output growth in February signals that the recovery process might have begun. To remind what the mixed signals were:

Capacity utilization in decline

Capacity utilization rate has been decreasing year-on-year since the beginning of 2012. This makes us think that recovery has not started. On the other hand, the rates of decrease were quite small in February and March, which implies that the economy could be at a turning point.

The improvement in real sector confidence index in January and February could have been a sign for recovery in private sector investment. But the index weakened in March, though at a limited degree. Still, all components of the index except expectation for exports in the next the months improved.

Weekly average of credit growth since the beginning of 2013 was 21.7 percent, considerably higher than it was in the second half of 2012. But credit and deposit rates have been in decline for some time now. These must have contributed to the start of recovery in the first quarter.

In January and February, non-gold exports increased at a rate beyond the 2012 average, indicating that a moderate recovery in growth must have started. Nevertheless, according to the Turkish Exporters’ Union data, annual export growth decreased notably in March.

Again in the first two months of 2013, non-gold and non-energy imports increased year-on-year despite the constant decline throughout 2012 except November. This implies that the volume of economic activity has started to increase at some degree.

In a nutshell, different indicators give mixed signals about growth performance. With the industrial output growth in February, however, those implying the start of a moderate recovery are stronger now. There still is a “but” though: if it has started at all, the sustainability of the recovery depends on favorable external conditions. The developments in the Cyprus gave a new warning sign. We must keep a close eye on elections in Italy.

This commentary was published in Radikal daily on 09.04.2013