Industrial output fell by 3.8% y/y in calendar-adjusted terms in December, following two months of y/y increases, the stat office (NSI) data showed. In seasonally-adjusted terms, industrial output fell by 2.3% m/m. Nevertheless, we think that industrial output will return to y/y growth in the short run, given the rising optimism in the industry sector in the January stat office’s business climate survey and the stable domestic demand.
The y/y decline was on the back of a 4.4% y/y fall in manufacturing output and a 3.6% y/y decrease in the utilities’ production. Food, beverages, clothing, base metals, metal goods, machinery, chemical products and furniture were among the segments, in which production posted y/y decline during the month. We think falling output in the manufacturing sector was due to lower external demand, possibly from both EU trade partners and Turkey, as illustrated by falling external sales during the month. Utility output also fell by 3.6% y/y in December, but we think it will recover as of January, as data from the Electricity System Operator showed a 12.0% increase in power production in January on the back of drastic export increase and rising domestic consumption.
Total industrial sales posted their first y/y decline since Jul 2016 and fell by 2.6% y/y in December. Their deterioration was on the back of a 10.2% y/y decrease in external sales. Domestic sales remained in the positive territory and rose by 2.8% y/y, but the growth rate decelerated from 3.2% y/y in the previous month. The decline in external sales was broad-based, and was in particular visible in the food, chemical products, non-metal mineral commodities, base metals and metal goods. We think that the slight decline in global oil prices during the months as well as the moderation of eurozone economic activity might have been the factors exerting a downward pressure on the industrial sales abroad.
In terms of industrial groupings, industrial output fell y/y in energy, investment and consumer non-durable products. Production of intermediary goods and consumer durable goods increased y/y, but at a decelerating pace from the previous month.