October was not different

I don’t see any sign of a revival in industrial output in October compared to the third quarter.

Capacity utilization ratio (CUR) in industrial sector for October was announced before the Bairam and the Republic Day. Probably because of the festive atmosphere, I came across positive assessments on the CUR figures, based on month-on-month comparison of seasonally adjusted data. Indeed, CUR ratio increased from 72.8 percent in September to 73.1 percent in October. Yet, due to the festive mood, the assessments overlooked one detail: the CUR for October was below the average CURs for the first and the second quarter, during which the economy grew at a rate below its potential (Table 1). If we are to look for a reason other than the festive mood surrounding the country, we can say that the CUR for October was hardly higher than that for the third quarter.

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I have previously stressed that in some cases seasonally adjusted series might give misleading results. This is why I sometimes avoid using such filtered figures. Furthermore, when you review the new CUR series released since 2007, there is no strong evidence of any seasonal movement. Comparing year-on-year changes in CUR figures instead gives healthier results. From this perspective, CUR figures have been lower than that in the same period last year since February, and the gap was even larger in the last three months.

I am aware that such perspective just shows that annual growth rate in 2012 is lower compared to the year before and that it does not explicate whether growth in the current quarter will be any different than that in the previous quarter. So, in order to speculate on the growth performance compared to the third quarter, it will be useful to revisit Table 1, “neglecting” minor differences. I don’t see any sign of a revival in industrial output in October compared to the third quarter. As you might note, I directly associated industrial production with the CUR. It will be useful to picture this relation. Figure 1 shows annual percentage change in the CUR and in industrial output. It is quite evident that they move harmoniously in the same direction. In brief, the performance in October was not promising either concerning economic recovery.

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