Turkish industrial production fell to the lowest level in more than three years in October as mining and manufacturing output plummeted, adding further pressure on policy makers to lower interest rates.
Annual production contracted 5.7 percent, after expanding 6.2 percent in September, the statistics agency in Ankara said on its website today. Output was expected to decline 2.5 percent, according to the median forecast of 10 economists in a Bloomberg survey. Production fell 0.9 percent from the previous month after adjustments for seasonality and working days.
Turkey’s economy expanded an annual 1.6 percent in the third quarter, the slowest pace since 2009, as Europe’s debt crisis worsened and the central bank tightened monetary policy to stem a lending boom that contributed to the world’s second-largest current-account deficit last year. The slowing growth has prompted the central bank, led by Governor Erdem Basci, to reverse course to spur lending and help offset the effects of export weakness.
October output “is likely to have been depressed by the Bayram holiday that fell at the end of that month,” Inan Demir, chief economist at Finansbank AS said in an e-mailed note before the figure was released, referring to the Muslim holiday of Eid Al Adha holiday. The low figure “also reflects payback to the very strong September reading, which in turn was boosted by another Bayram holiday in August. So, the bottom line is, we are not inclined to read too much into the weakness in October industrial production, and we think it will most likely prove temporary.”
The mining sub-index fell 10.8 percent, while the manufacturing component slipped 2.4 percent, the statistics agency said.
Industrial confidence fell for a seventh straight month in November, while capacity usage matched an eight-month low. Inflation eased to 6.4 percent in November from 7.8 percent the month earlier. That rate, the lowest in 14 months, provided the central bank with more room to reduce borrowing costs.
The central bank has lowered the top end of its so-called interest-rate corridor and kept bank borrowing costs near the bottom of the range in recent weeks, without reducing the 5.75 percent benchmark repo rate.
The current-account deficit, which was almost 10 percent of GDP in 2011, will ease to 6.6 percent in 2012 and widen to 6.9 percent in 2013, Morgan Stanley said in a Dec. 7 report.