Turkey | Promising signal from May IP

Summary

IP declined by 1.3% yoy in calendar adjusted terms in May, slightly better than market expectation (-2%). Hence, the annual contraction in IP (c.a.) decelerated further from -4.7% in 1Q19 to -2.6% in the first two months of 2Q19. In absence of new shocks, we maintain our GDP growth forecast at 0.3% for 2019.

Key points

• Key points:
• May IP increased by 1.3% mom in calendar and seasonal adjusted terms, signaling that the moderation observed in April could be temporary.
• Our monthly GDP indicator nowcasts a growth rate of 0.4% yoy in May (91% of info) and 1.2% yoy in June (32% of info).
• Despite the downside risk on the back of the long Bayram holiday in June (-4 working days in supply side indicators), high frequency indicators began to reconfirm the recovery trend as of June and reducing the likelihood of a “W” pattern.
• The complacency should be ruled out with prudent and comprehensive policies to enhance confidence as the geopolitical and policy uncertainties still remain.
• According to our view, the current positive momentum, expected easing in financial conditions and favorable base effects could lead GDP to grow by 0.3% in 2019.

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