PMI and all that

PMI survey data from the

Istanbul Chamber of Industry and IHS Mark t suggest some moderat on n November. As w th nflat on, we don’t know f the decelerat on n the rate of slowdown, .e. ‘moderat on’, s here to stay. However, new nputs are not be ng purchased and stock deplet on s st ll n vogue. Although lower than expected o l pr ces help, and exchange rate stab l zat on prov des some resp te, g ven the latest developments, o l pr ces may go up somewhat aga n. L ra stab l zat on s key but costs of product on have already been up and unless exports help, I don’t know what w ll happen to ndustr al product on n the com ng months. The quest on here sn’t whether there w ll be a, say, nearrecess on ( t s already here). The quest on s to guesst mate whether the recess on w ll last longer than two quarters and/ or f there s ground for some sort of a ‘muddl ng through’ n 2019. Synd cat ons look good but let’s not forget that not all of them are effect vely cash. There are roundabout ways to get to 100 percent rollover w th the help of non-cash transact ons. Banks may not need all that money n fact because they aren’t lend ng anyway. Let’s not d rectly compare the rollover rat os w th the aftermath of 2008 though. O l pr ces are down from around $77 n late August to $60 range n m d-December. Th s s an almost 25 percent drop. Costs w ll be curta led f $60 w ll be ma nta ned. The d s nflat onary mpact w ll be about 1.5 po nts. Th s s one of the reasons why banks are env s on ng an eventual ‘back to bus ness’ move. It sn’t only the current account def c t but the mpact on costs that matters. MSCI-Turkey spread s also down from around 68 by m dAugust to 55 by m d-December. Of course, we came here from approx mately 33 by the end of 2017 but st ll, there s some k nd of return to normalcy. We don’t expect to make all the ga n at once; th s s mposs ble. Growth nvestors n part cular w ll stay away for a few months but value nvestors w ll do exactly the reverse. Th s s the other s de of the ‘muddl ng through’ co n.