Fatih Özatay, PhD - [Archive]

Growth disrupts estimates 09/12/2010 - Viewed 1150 times

Data revealed that in October industrial production regained the pre-crisis level.

This is the week of two important indicators: industrial production index for October was announced yesterday. And tomorrow we will learn about the GDP figures for the third quarter.

Common belief was that in the fourth quarter high growth rate (to be) achieved over the first three quarters will drop rapidly. Nonetheless in October, i.e. the first month of the fourth quarter, industrial production rose by 9.8 percent year-on-year. This is a significant rise.

Month-on-month increase is high

What is more important, as figures net of seasonal and calendar effects suggest, industrial production also rose month-on-month by 3.1 percent. This is a considerable rise, too. However the said data did not change at all in September compared to August. When assessed together with the changes in some confidence indices and exports, the stagnant production in September was interpreted as a data which at least did not confuted the lower growth estimate for the fourth quarter.

The third and in my consideration the most important finding about the data announced the day before is that it revealed that in October industrial production regained the pre-crisis level. This way we finally get out of the hole we felt in along with the crisis (Figure 1). The peak level of production before the crisis was achieved in March 2008. To put it differently, we got where we were after 31 months.

This development in industrial production will necessitate the growth estimates for 2010 to be revised upwards. It appears that growth rate will stand quite above the official estimates higher than 7.5 percent.

In order for us to maintain that the impacts of the crisis are fully overcome, we are yet to see another development: achieving a downwards move in unemployment rate toward the pre-crisis level. Before the crisis unemployment rate was 10 percent. The recent data for 2010, which is recorded in August indicate that unemployment rate is still 2 percentage points higher compared to the period before the crisis. Data for September will be announced soon. Nonetheless it will not be realistic to expect such a significant fall in the rate at once. We need more time for this.

Figure 1. Industrial production index net of seasonal and calendar effects: January 2005- October 2010.

This commentary was published in Radikal daily on 09.12.2010