(Bloomberg) — Turkey’s $1.1 trillion economy grew much faster than forecast, avoiding a contraction during a two-quarter stretch when the central bank delivered the bulk of its massive interest-rate hikes.
Gross domestic product expanded 1% in the fourth quarter from the prior three months in seasonally and working-day adjusted terms, according to data published on Thursday. That marked a slight acceleration from the third quarter, when GDP expanded just 0.3%.
Household spending and investment powered a pickup in the fourth quarter that was higher than all but one forecast in a Bloomberg survey of economists, whose median was 0.3%. The economy grew 4.5% in the full year, down from 5.5% in 2022.
“We continue to see a consumption-oriented growth albeit at a slower pace, evident from the momentum loss in imports and the net export contribution to GDP getting closer to zero,” Okan Ertem, senior economist at Turk Ekonomi Bankasi AS.
The pivot toward tighter monetary policy since June was trying to put restraints on consumption that accounts for more than half of gross domestic product. The goal is to engineer a slowdown in inflation swollen from an era of cheap money.
Yet even on an annual basis, the economy fared far better than expected last quarter, with GDP growing 4% from a year earlier. That was more than the 3.5% median estimate in another Bloomberg poll but a slowdown from an upwardly revised gain of 6.1% in the third quarter.
“We are moving toward better quality growth with investment and exports that we strongly support,” Treasury and Finance Minister Mehmet Simsek said in a statement. “In 2024, we expect moderate and balanced growth, with net external demand making a positive contribution.”
A less upbeat outlook doesn’t mean the central bank won’t consider further rate hikes on top of a cumulative 36.5 percentage points of increases through January. Newly installed Governor Fatih Karahan already signaled more tightening could be warranted should domestic demand take off after wage increases in Turkey.
While the economy is shifting into lower gear, the resilience of consumer spending may present a challenge for Karahan as he looks to bring inflation to 36% by the end of the year, roughly half the peak level it’s expected to reach in the coming months.
What Bloomberg Economics Says…
“Household consumption defies gravity in Turkey’s fourth-quarter GDP data — and that is bad news for the central bank. With growth likely to receive a pre-election bump in the first quarter of 2024, pressure is mounting on policymakers to deliver further tightening post the vote. Whether this will be through higher rates or restrictive alternative tools will depend on how inflation progresses over the next few months.”
— Selva Bahar Baziki, economist. Click here to read more.
A quarterly contraction in industrial production during the final three months of last year contrasts with a slight expansion in retail sales. It’s a pickup attributed in part to a recent spike in credit card spending, as consumers brought forward their purchases in anticipation of higher wages ahead of local elections in March.
Economists at Turkiye Garanti Bankasi A.S. said their big data indicators “signal that consumption is not decelerating much further since November,” according to a report this month. “Domestic demand remains stronger than supply, posing risks on both inflation and the current account deficit.”
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
