TODAY’S ZAMAN – Lira tumbles as industry output sees year’s biggest drop in October

Lira tumbles as industry output sees year’s biggest drop in OctoberTurkish industrial production in October fell 18 percent from the previous month, registering the biggest monthly loss so far this year, sending the lira to a two-month low, government data revealed on Monday.The figures from the Turkish Statistics Institute (TurkStat) indicate that the industrial sector continues to send mixed signals about the upcoming release of economic growth figures.

Output had risen 21 percent from August to September Turkeyand#39s calendar-adjusted industrial production expanded 24 percent year-on-year in October, less than market estimates that indicated it would be above 3 percent.The marketsand#39 reaction to Mondayand#39s figures was followed closely.

The TurkIsh lira weakened to as low as 228 per US dollar on Monday, the lowest in two months. Main index Borsa Istanbul (BIST) fell 066 percent to 84,663 on Monday, while the two-year benchmark interest rates hovered around 005 percent higher at 8 percent.

The decline of the lira against the greenback comes on the heels of speculation over the weekend that strong employment data on Friday would encourage the US Federal Reserve to raise interest rates some time in 2015. Turkey would be especially vulnerable to a rate increase in the worldand#39s largest economy because it depends on foreign capital inflow to finance a mammoth current account deficit, its main economic handicap.

The Turkish economy grew on a yearly basis by 21 percent in the second quarter, lower than all forecasts, which were around 3 percent. The countryand#39s gross domestic product (GDP) growth was 32 percent the first half of this year, a weak record compared to an average growth rate of about 6 percent between 2002 and 2012.

Mondayand#39s data showed that Turkish manufacturing output dropped 17 percent in October from September, while the mining and quarry sector declined by 29 percent. Utility output also declined 22 percent.

TurkStat data said the production of durable consumer goods dropped 27 percent month-on-month in October, while the intermediate goods and energy sector output fell 09 percent and 26 percent respectively.One of the key industries for Turkey, automotive production, stalled in November Automotive production was unchanged year-on-year at 113,093 vehicles in November, the Automotive Industry Association (OSD) said on Monday.

In the first 11 months of the year, automotive output rose 1 percent to 105 million vehicles, the OSD said in a statement.CHP: Moodyand#39s intentionally holding up its Turkey ratingsCredit rating agency Moodyand#39s is intentionally postponing its update of Turkeyand#39s credit score due to increasing risks and the diminishing managerial skills of the government, said opposition Republican Peopleand#39s Party (CHP) Deputy Chairman Faik ztrak in a written statement.

andldquoMoodyand#39s has gotten into the habit of avoiding their scheduled assessments of Turkey due to rising geopolitical and economic risks in conjunction with the gradually dwindling managerial skills of the government,andrdquo said ztrak. The rating agency was expected to update Turkeyand#39s credit rating and economic outlook on Dec 5 Moodyand#39s had previously postponed its evaluations of Turkey in August.

Prior to that, the agency downgraded Turkeyand#39s economic outlook status from stable to negative, a move that angered the ruling Justice and Development Party (AK Party). Domestic factors such as the negotiation process between the government and the Kurdistan Workersand#39 Party (PKK), the approaching general election of 2015 and increasing antidemocratic crackdowns are being taken into consideration by Moodyand#39s, said ztrak.

The ratings agency is also considering geopolitical developments such as the crises in Syria and Iraq, and the increasing risks in Ukraine and Russia Prior to the scheduled Dec. 5 update, Economy Minister Nihat Zeybeki said he did not expect a negative rating from Moodyand#39s.

President Recep Tayyip ErdoIan has been known to criticize rating agencies such as Moodyand#39s, Fitch and SP whenever these institutions issue an evaluation that he finds unfavorable. He has publicly lambasted and threatened to sever ties with these agencies at various intervals.

SOURCE: Today’s Zaman