Industrial production and growth signal stupendous Q3 GDP print
► However, th s s past data after all. The ‘b g d vergence’ s st ll ongo ng, as reta l sales data suggests. Indeed, the decl ne over September 2016 s 1.2% n September 2017. Th s clearly squares w th the d v de between consumer sent ment and producer conf dence. ► We are mpressed by the recent IP data and ready to pen n a large GDP growth pr nt for both Q3 and year-end 2017. But we also see ser ous r sks ahead. The whole story s based on cred t and f Turk sh banks and corporates become net payers n 2018, t w ll be so tough to susta n such growth n the absence of a new lever. Ch na s a b g mporter of o l, and that w ll have a bear ng on global markets. Interest rates are go ng up, TRY s now frag le and volumes are shr nk ng. We awa t yet another ‘ nnovat ve’ move, beyond extend ng the KGF, an nherently temporary dev ce that cannot be bu lt nto the system w thout caus ng ser ous moral hazards. An excellent pr nt, but don’t cheer up yet! ► Calendar adjusted quarterly ndustr al product on (IP) s up by 10% n Q317 over Q316. Meanwh le, seasonally and calendar adjusted IP rose by 1% QoQ. These are except onally strong pr nts and suggest a sky-h gh Q3 GDP. Espec ally eye-catch ng s the manufactur ng ndex, wh ch showcased a 10.4% ncrease over Q316 – nterest ng g ven the chart show ng d rect onal headw nds of mach nery & equ pment and construct on nvestments. Whatever the shortcom ngs, prepare for stupendous Q3 GDP data.
► Our GDP est mate has been r s ng s nce January, but n the ma n, come Apr l, growth of c. 5% was already on the cards. Depend ng on Q3, we th nk we should add 0.7 percentage po nts on top. Clearly, w nter s not n the data yet. In fact, 2017 w ll look l ke an except onal year. Nevertheless, the performance was cond t onal upon (a) cap tal nflows, (b) the
Cred t Guarantee Fund (KGF)-tr ggered except onal loan growth – now a rel c of the past and (c) h gh publ c spend ng. None of these are pers stent. Gross f xed cap tal format on and manufactur ng IP are also mov ng n oppos te d rect ons, wh ch s perhaps nd cat ve of h gh sens t v ty n producer behav or go ng forward.