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Consumption on the rise, investments stagnant
In the light of the information available, 4 percent growth in 2013 is still achievable.
Lately I have addressed the vulnerabilities facing Turkey’s economy and consequent risks. I will stick to this issue for some time more. But today I want to switch back to the current news as important data was released.
Yesterday capacity utilization (CUR) and real sector confidence index (RCI) figures for May were announced. As you know both give critical information about the level of economic activity. RCI is closely associated with private investment expenditures and is a leading indicator for fluctuations in annual investment figures. RCI decreased year-on-year for eleven months starting in October 2011, fluctuated starting in October 2012 and decreased in March and April this year. The downward-movement continued in May and the RCI decreased year-on-year by 1.1 percent. The RCI was therefore steady in the last eight months.
The RCI involves indicators concerning both the current and the future outlook. The index for May showed year-on-year improvements for the majority of the indicators concerning the future. But the investment indicator is still lower than what it was in 2012. Hence, the RCI does not give any sign of recovery in investment spending.
CUR increased year-on-year by 0.1 percent in May. Though limited, this is the first time the CUR has increased since February 2012. This, of course, is a positive development. Moreover, it seems that the improvement will not be temporary: the gap between 2012 and 2013 closed down gradually each month and CUR finally increased in May. And we know that there is a close relationship between the CUR and industrial output, and hence growth rate.
This is a positive sign for recovery for the second quarter. Yet, it should be noted that it will be rather limited. Given the fact that export performance was stronger in the first four months of the year compared to the same period in 2012 and the above picture concerning investment expenditures, the recovery will be based mainly on consumption. This is not a surprise with deposit and security rates have been falling below inflation and the 15-percent credit growth threshold being loosened.
In the light of the information available, 4 percent growth in 2013 is still achievable. We will wait for foreign trade and industrial output figures to for a more concrete decision. Meanwhile, GDP growth for the first quarter also will be announced.
This commentary was published in Radikal daily on 28.05.2013