Turkish May manufacturing data exceeds expectations but does not signal strong recovery

Data released by the Turkish Statistical Institute on Thursday showed Turkey's industrial production accelerated at a faster-than-expected pace in May. Industrial production advanced a calendar-adjusted 5.6 percent year-on-year in May, well above economists' expectations for a 3.6 percent climb. It was also much faster than the 0.7 percent rise in April.

Production in the manufacturing sector grew 6.3 percent annually in May and utility sector output gained by 3.2 percent. Meanwhile, production in the mining and quarrying sector registered a decrease of 0.8 percent. Manufacturing output rose by 1.6 percent m/m in May reversing the two prior months' declines which cumulated to 1.5 percent contraction. The recovery is expected to continue at least through Q3 in light of the easing of tensions with Russia and Israel.

Nevertheless, data does not suggest that a strong industrial recovery had begun. The May industrial output figure only makes up for several weak months prior to that. Manufacturing growth over the past twelve months has just been around 3.6 percent, while that for 2016 year-to-date works out to just 1.8 percent. For a country, whose trend growth rate is much faster than other CEE countries, Turkish manufacturing has, in fact, been underperforming since 2014 and the May data did not really buck this trend.

"We forecast 3.5 percent GDP growth this year, with slight risk to the upside if regional tension fully eases off in one go. But still, there is no reason for hyperbole," notes Commerzbank in a report.