Turkey Monitor: More Rate Hikes Needed to Control Inflation | Article

Industrial production in June recorded a calendar-adjusted 0.64% year-on-year increase, while in seasonally adjusted terms it increased 1.55% month-on-month, taking the index to another high. Consequently, performance in the second quarter has strengthened to 2.3% quarter-on-quarter, showing strong activity thanks to the support provided to the earthquake regions and robust domestic demand thanks to lax policies. In the breakdown, intermediate goods provided the largest contribution to the overall rate, with 0.9 percentage points, a sequential increase of 2.2%. This was followed by non-durable consumer goods, which raised the headline rate by another 0.5 percentage points. On the negative side, durable goods dragged the rate down by 0.1 percentage points. By sectors, computer products, base metals, non-metallic minerals and food were the main elements supporting the monthly performance. The first indicators for the third quarter point to a gradual slowdown as: i) economic confidence in August plummeted to the lowest level since mid-2022, due in particular to the fall in consumer confidence ii) the PMI remained stable below the threshold of 50 in the third quarter, and iii) the capacity utilization rate moderated in August.