Source: TurkStat
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Source: TurkStat
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UK GDP growth in Quarter 1 2017 has been revised down by 0.1 percentage points from the preliminary estimate published on 28 April 2017; mainly due to broad-based downward revisions within the services sector. This was partly due to rising prices.

Source: Republic of Turkey Ministry of Economy

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2. Annual growth was driven by domestic demand in the last quarter of 2016. Private spending was up both annually and quarterly thanks to the demand brought forward by automobile tax adjustments, eased macro prudential measures and better financial conditions. Investments, particularly machinery and equipment investments, were relatively weak in this period. With exports accelerating in the last quarter, net external demand provided considerably higher contribution to quarterly growth and a slightly better contribution to annual growth compared to the first nine months of 2016.

3. The first-quarter data for 2017 hint at diminishing recovery in economic activity in the first quarter. Following a robust increase in January, industrial production contracted in February. Rapid depreciation of the Turkish lira at the start of the quarter, uncertainties led by volatile financial markets and the leap in inflation are projected to dampen consumption and investment spending. Although tax incentives stimulate the demand for houses, furniture and home appliances, the recovery in domestic demand fails to spread across all sectors. Indicators for March and April signal for a stronger economic activity and labor market. In brief, the mild recovery in the underlying trend of economic activity continues, which is enhanced by supportive incentives and measures.

4. Despite a partial recovery in domestic demand, net external demand spurs growth with robust increases in exports of goods that spill over into all sectors. The growing demand from the European Union economies, normalizing relations with neighboring countries, the course of the real exchange rate, and Turkey’s market-shifting flexibility abroad continues to stimulate exports. Increases in exports of goods translate into a decelerated deterioration in the current account deficit and improvement in core current account deficit indicators. In addition to the expected partial recovery in tourism, the robust course of exports of goods is expected to contribute positively to the current account.

5. The worsening trend in the labor market that began in May 2016 came to a halt in January 2017. In this period, non-farm employment recorded an uptick particularly with the contribution from the services sector. Meanwhile, leading indicators, such as new job vacancies, the PMI employment index and the expectations for the number of employees in services and construction for March and April suggest a recovery in the employment outlook. Amid the mild rebound in economic activity and the announced employment incentive packages, the partial improvement in unemployment rates is expected to continue.

6. In sum, the recently released data indicate a gradual recovery in the economic activity. Domestic demand conditions display a moderate improvement and demand from the European Union economies continues to contribute positively to exports. With the supportive measures and incentives provided recently, the economic activity is expected to gain further pace in the forthcoming period. However, the course of capital flows in line with uncertainties regarding global economic policies, geopolitical developments, the subsided course of the labor market and the lingering volatility in exchange rates may stand out as factors to limit the pace of growth in 2017.

Source: Central Bank of the Turkish Republic

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The highest increase in seasonally and calendar adjusted hourly labor cost index was in economic activity E (Water supply; sewerage, waste management and remediation activities) with 6.2% in the fourth quarter of 2016 compared to previous quarter.

Hourly labor cost index, Quarter IV: October – December, 2016
[2010=100]

Hourly earnings index increased by 0.9% compared to previous quarter
Seasonally and calendar adjusted hourly earnings index increased by 0.9% in the fourth quarter of 2016 compared to previous quarter for the total of covered economic activities. Economic activity breakdown shows that this figure was increased by 2.8% for industry sector, 3.0% for construction sector and decreased by 0.4% for services sector.

The highest increase in seasonally and calendar adjusted hourly earnings index was in economic activity D (Electricity, gas, steam and air conditioning supply) with 9.2% in the fourth quarter of 2016 compared to previous quarter.
Hourly earnings index, Quarter IV: October – December, 2016
[2010=100]
Hourly labor cost excluding earnings index decreased by 2% compared to previous quarter
Seasonally and calendar adjusted hourly labor cost excluding earnings index decreased by 2% in the fourth quarter of 2016 compared to previous quarter for the total of covered economic activities. Economic activity breakdown shows that this figure was decreased by 3.4% for industry sector, 1.2% for service and increased by 2% for construction sector.

The highest decrease in seasonally and calendar adjusted hourly labor cost excluding earnings index was in economic activity J (Information and communication) with 13% in the fourth quarter of 2016 compared to previous quarter.
Hourly labor cost excluding earnings index, Quarter IV: October – December, 2016
[2010=100]

Seasonally and calendar adjusted hourly labor cost indices, 2013-2016

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