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Turkish Industrial Output Smashes Forecasts
By JOE PARKINSON And YELIZ CANDEMIR
ISTANBULTurkish industrial production, the leading indicator of economic output, smashed forecasts in September, hitting the highest level since February and underscoring the continued momentum of the country's fast-growing economy.
But the data also stoked fears that Turkey's economy is overheating and that central bank action has failed to slow demand.
Technicians worked on a Boeing 787 aircraft elevator section at a plant in Ankara, Turkey's capital, on Sept. 14. Turkey's industrial production surged in September, highlighting the economy's continued strong growth.
The national statistics institute said industrial production rose 6.9% on the month in September. It gained 12% on the year, double the 6% annual expansion forecast by economists. September's industrial output was also far higher than the 3.8% annual rise recorded in August.
The numbers were bolstered by the Ramadan religious holiday, which took place in August this year and September in 2010. But output gains were still strong across the board, demonstrating strong domestic demand.
The data lifted Turkish stocks while the lira held early gains against the dollar and the euro.
Economists said the new numbers illustrate that efforts to slow demand had fallen flat and strengthen the case for a benchmark hike in interest rates.
Turkey's economy outstripped China to record the fastest growth of any Group of 20 economy in the first half of 2011, propelled by record low interest rates and booming domestic demand.
But economists are increasingly worried that Turkish monetary policy remains too loose, fuelling a rapid expansion of a current account deficit forecast to top 9% of gross domestic product this year and raising the chance of a hard landing.
Partly because of market nerves, Turkish assets have weakened dramatically, even as the economy has posted rapid growth.
To stem the lira's fall, Turkey's central bank last month more than doubled the interest rates it charges banks for overnight loans to 12.5% from 5.75%. The move followed a series of failed attempts in recent weeks to intervene in currency markets to stem the decline.
But many economists see the technical tightening as insufficient to tame rampant demand and narrow the current account deficit, the economy's key weakness.
"The current policy mix doesn't go far enough to tackle the country's wide current account deficit in a credible manner, thereby leaving the economy vulnerable to sudden shifts in investor sentiment," said Citi economist Ilker Domac in a research note.
Output expanded rapidly across the board. A 12.8% surge in manufacturing provided the largest contribution to the industrial output growth, while a 9.9% rise in electricity and distribution and a 2.2% expansion in mining also boosted the headline figure.
Turkish Industrial Output Smashes Forecasts - WSJ.com
By JOE PARKINSON And YELIZ CANDEMIR
ISTANBULTurkish industrial production, the leading indicator of economic output, smashed forecasts in September, hitting the highest level since February and underscoring the continued momentum of the country's fast-growing economy.
But the data also stoked fears that Turkey's economy is overheating and that central bank action has failed to slow demand.
Technicians worked on a Boeing 787 aircraft elevator section at a plant in Ankara, Turkey's capital, on Sept. 14. Turkey's industrial production surged in September, highlighting the economy's continued strong growth.
The national statistics institute said industrial production rose 6.9% on the month in September. It gained 12% on the year, double the 6% annual expansion forecast by economists. September's industrial output was also far higher than the 3.8% annual rise recorded in August.
The numbers were bolstered by the Ramadan religious holiday, which took place in August this year and September in 2010. But output gains were still strong across the board, demonstrating strong domestic demand.
The data lifted Turkish stocks while the lira held early gains against the dollar and the euro.
Economists said the new numbers illustrate that efforts to slow demand had fallen flat and strengthen the case for a benchmark hike in interest rates.
Turkey's economy outstripped China to record the fastest growth of any Group of 20 economy in the first half of 2011, propelled by record low interest rates and booming domestic demand.
But economists are increasingly worried that Turkish monetary policy remains too loose, fuelling a rapid expansion of a current account deficit forecast to top 9% of gross domestic product this year and raising the chance of a hard landing.
Partly because of market nerves, Turkish assets have weakened dramatically, even as the economy has posted rapid growth.
To stem the lira's fall, Turkey's central bank last month more than doubled the interest rates it charges banks for overnight loans to 12.5% from 5.75%. The move followed a series of failed attempts in recent weeks to intervene in currency markets to stem the decline.
But many economists see the technical tightening as insufficient to tame rampant demand and narrow the current account deficit, the economy's key weakness.
"The current policy mix doesn't go far enough to tackle the country's wide current account deficit in a credible manner, thereby leaving the economy vulnerable to sudden shifts in investor sentiment," said Citi economist Ilker Domac in a research note.
Output expanded rapidly across the board. A 12.8% surge in manufacturing provided the largest contribution to the industrial output growth, while a 9.9% rise in electricity and distribution and a 2.2% expansion in mining also boosted the headline figure.
Turkish Industrial Output Smashes Forecasts - WSJ.com
