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Monday, October 22, 2007

Turkey Consumer Confidence September 2007

According to data released by Turkstat today Turkish consumer confidence dropped back slightly in September. Given everything that is happening at the moment I suppose that that is hardly surprising. The Consumer Confidence Index, which was 98.25 in August 2007, decreased by 1.16% compared to August 2007 and became 97.11 in September 2007.

At the end of the day, confidence is still at a pretty high level, and I suppose that that is the interesting and important thing.

Monday, October 15, 2007

Turkey Employment July 2007

Working age population in Turkey increased by 880 thousand in the period of between July 2006 and July 2007. The non-institutional civilian population increased by 922 thousand persons and has reached to 73 million 567 thousand persons, while the non-institutional working age civilian population increased by 880 thousand and reached 52 million 581 thousand in July 2007.

Non-agricultural employment increases by 540 thousand

The number of employed persons increased by 490 thousand persons compared to the same period of the previous year and reached to 23 million 747 thousand persons in July 2007. Agricultural employment decreased by 50 thousand persons and non-agricultural employment increased by 540 thousand persons in this period.

Of those who were employed in July 2007, 28.7 % were employed in agriculture, 18.7 % in industry, 6.4 % in construction and 46.2 % in services. Employment in agriculture decreased by 0.8 and industry decreased by 0.3 percentage points while construction employment increased by 0.4 and services employment increased by 0.7 percentage points.

The number of unemployed increased by 45 thousand compared to July 2006 and reached 2 million 296 thousand. The unemployment rate was unchanged at 8.8 %. Unemployment rate was 11.2 % in urban areas and 5.4 % in rural areas.

The labour force participation rate (LFPR) increased to 49.5 % with 0.2 percentage points increase compared to July 2007. The LFPR increased to 72.9 % for males and to 26.7 % for females. LFPR was 46.2 % in urban areas and 55.4 % in rural areas.

As can be seen in the chart below, Turkey is struggling to provide sufficient employment for a very rapidly increasing working age population.

The quantity of employment has increased considerably (in terms of employment creation) over the last 12 months. The decline in both employment and enthusiasm to join the labour force that was produced by last summmers financial crisis is clear to see in the data, as is the subsequent recovery.

A similar picture is evident if we come to look at the unemployment data.

Wednesday, October 10, 2007

Turkey CPI September 2007

According to data released last week from Turkstat, the general consumer price index rose by 1.03% in September on August. On December 2006 the index rose by 4.19%, on same month of the previous year by 7.12% and on the twelve months moving averages basis by 9.17%.

The highest monthly increase was 2.29% in the index for food and non-alcoholic beverages. The indices rose for education by 2.28%, for clothing and footwear by 1.62%, for hotels, cafes and restaurants by 1.07%, for housing by 0.97%, for miscellaneous goods and services by 0.79%, for transportation by 0.61%, for health by 0.08%, and for alcoholic beverages and tobacco by 0.02%. The indices declined for communication by 0.50%, for recreation and culture by 0.71%, and for furnishings and household equipment by 1.24%.

These results represent a marginal improvement in the annual inflation rate from the 7.39% recorded in August. As Serhan Cevik points out, September is always a tricky month in Turkey, given seasonal fluctuations and other possible economic shifts. This year has been even more challenging because of the Ramadan effect. Based on the lunar calendar, the month of Ramadan starts 10 days earlier each year, resulting in another type of seasonality in countries with a predominantly Muslim population. The effects of Ramadan and festivities are especially significant on food and clothing prices. And this is exactly the difficulty we face this year. As Cevik says:

Food prices are already on the rise and the Ramadan effect — increasing food consumption by around 20% from the average of the rest of the year — could exacerbate inflation pressures. Likewise, clothing prices may show a more pronounced seasonality during and right after the month of Ramadan, intensifying ‘back to school’ price adjustments. Nevertheless, we stick with our long-standing call that disinflation will accelerate towards year-end, and especially in 2008, thanks to supportive economic fundamentals.

Food prices have increased a lot all around the world and have become a significant inflation risk in countries where food represents a greater share of the CPI. In Turkey’s case, food accounts for 28.5% of the consumption basket and thereby could make the headline figure more volatile. For example, over the past two years, food price inflation increased from 4.9% at the end of 2005 to 14.2% at the beginning of this year. After declining to 9.2% in July, food price inflation surged to 12.4% in August. This sustained increase and higher volatility in food prices is mainly a result of the changing behaviour of unprocessed food prices. The year-on-year rate of increase in unprocessed food prices surged from an average of 2.9% in 2005 to 21.8% in July 2006 and then declined to 10.8% in November 2006. However, there was yet another burst to 20.7% at the beginning of this year, followed by deceleration towards 8.9% in July. Once again, that turned out to be temporary and unprocessed food prices recorded a year-on-year increase of 16.2% in August.

Basically the good news is that inflation is on the way down, and should be in the region of 6% by the end of the year and may well fall below 4% by the second quarter of next year. However there are still large scale downside global risks arising from the potential for higher commodity prices and the impact of financial volatility on the value of the lira. Furthermore, domestic demand is set to recover in the second half of the year and especially as we enter in 2008. Given all this, the Central Bank of Turkey will most likely maintain a cautious stance and normalise short-term interest rates at a measured, gradual pace, possibly to 16.5-16.75% this year and 14.5-15% next year.

Tuesday, October 09, 2007

Turkey Industrial Production August 2007

The Turkish monthly industrial production index increased by 6,1 % in August of 2007 compared to the same month of 2006

Monthly Industrial Production Index with the base year 1997=100, composed from the production information of 2005 important industry items according to ISIC Rev.3, reached 146,8 by increasing 6,1 % in August of 2007.

In the sub sectors level of industry, mining sector index reached from 113,5 to 130,3 by increasing 14,8 %, manufacturing industry sector index changed from 135,0 to 142,0 by increasing 5,2 %, electricity, gas and water index reached from 190,4 to 206,8 by increasing 8,6 % in August of 2007 compared with same month of the previous year.

When the eight-month average of 2007 is also compared to previous year, total industry sector index reached from 135,1 to 142,3 by increasing 5,3 %, mining sector reached from 96,4 to 106,5 by increasing 10,5 %, manufacturing industry sector reached from 134,1 to 140,2 by increasing 4,5 %, electricity, gas and water sector reached from 168,9 to 185,5 by increasing 9,8 %.

Tuesday, October 02, 2007

Turkey August 2007 Trade Deficit

What follows is a brief research note on the latest monthly trade data from Turkey. (Anyone interested in a more in-depth analysis of recent developments in the Turkish economy can try my post The Anatolian Tiger, for Global Economy Matters, 9 September 2007).

The coupling-uncoupling issue is a complex one. In many ways there are clear signs that some parts of the global economy are more coupled than ever before. To take one case in point, Japan. As Richard Katz noted, Japan can hardly be said to have uncoupled from the United States economy given that, since 2001, there has been a 77 per cent correlation between Japanese GDP growth and the level of exports in the previous quarter. Indeed, during the years between 2000-2007, the correlation between GDP growth in the US and Japan was 74 per cent. On the other hand, and changing continents adroitly, Serhan Cevik informs us that that the equivalent correlation for Turkey was 71 per cent, and this close relationship exists in the data despite the fact that only 5% of Turkey's exports actually end up in the US.

The key to understanding this mysterious Turkey-US "coupling" undoubtedly passes through the Eurozone, and in particular through Germany, which is, in its turn, very dependent on exports for achieving economic growth. So it is with this focus in mind that I am going to take a quick look at the latest trade data from Turkey.

According to provisional data from the Turkish Statistical Office Turkish exports grew in August 2007 by 27.7% (year on year) and reached a value of 8,698 million Dollars. At the same time imports grew by 22.2% reaching 15,006 million Dollars. The foreign trade deficit for August thus increased by 15.4% over August 2006, rising from 5,465 million Dollars to 6,308 million Dollars.

The weight of the EU in Turkish Exports remains important. Over the January-August 2007 period, and when compared with the same period of the previous year, exports to the EU were 37,960 Million Dollars - or up by 25.9%. The proportion of the EU countries in total exports was 56.6%.

In August 2007, the main export partner was Germany with 1,044 million Dollars, an increase of 41.9% over August 2006. So Turkey is evr more dependent in this business cycle on Germany for export growth while Germany is dependent on both the US and Eastern Europe for both export growth and GDP growth. (The principal driver of Turkish growth is not at this point exports but rather domestic demand and investment).

Germany was followed in importance by the UK (699 Million Dollars), Russia (423 Million Dollars), France (417 Million Dollars), Italy (414 Million Dollars) and the USA (343 Million Dollars).

For August 2007, the top country for Turkey’s imports was Russia (2,059 Million Dollars) reflecting Turkey's dependence on imported energy, while imports from other countries range from Germany (1,857 Million Dollars), to China (1,289 Million Dollars), to Italy (879 Million Dollars) and the USA (812 Million Dollars).

For the period January-August 2007, road vehicles and components had the highest value share in exports at 9,940 million Dollars, followed by iron and steel (5,762 million Dollars), machinery, mechanical appliances, boilers, equipment and parts 5,619 million Dollars) and articles of apparel and clothing accessories (5,314 million Dollars).

Over the same period, the top categories for imports were mineral fuels and mineral oils (20.401 million Dollars) followed by machinery, mechanical appliances, boilers, equipments and parts (14,145 million Dollars) and ıron and steel (10,518 million Dollars).

What we can see from all of this is that, at least in foreign trade terms, Turkey is very dependent on the EU, and in particular on Germany and the EU 10. Since Germany is itself very dependent for growth on exports to the US and the EU 10, we can expect any slowdown in that mechanism to find a reflection in the level of economic activity in Turkey.