Friday, July 10, 2009

Followup on weekly column: Latest Data

I had noted in my last Hurriyet column that forecasting second quarter GDP would not be easy:
Looking forward, while forecasting the first quarter was rather easy, as seen from the convergence of market economists on a 12-13% contraction, projecting the second quarter will be much more difficult, as there will be two affects more difficult to estimate: A natural bounce-back, amplified by the impact of the fiscal stimulus, especially the tax cuts. This week’s May industrial production and June capacity utilization releases should clear up the outlook a bit.
After the marginally positive May Industrial Production (IP) outturn, June Capacity Utilization (CUR) was again marginally positive, with an across the board recovery. The CUR figure roughly translates to a 2-3% mom rise in IP in June, as the series are closely correlated:

This week's IP and CUR figures all but ensure that we will get a positive, albeit small, qoq growth in the second quarter. However, this would translate to a yearly contraction just short of double digit territory, so we are definitely not out of the woods yet.

In the Hurriyet column, I also noted that the contribution of net exports to growth is likely to be smaller in the second quarter:
But for one thing, while I would want to wait for Friday’s volume figures to say for sure, last week’s April trade data hint that the contribution of net exports will not be as large in the second quarter, as the gap between the contraction of exports and imports is narrowing.
Today's trade volumes have more or less ascertained this prediction, as the gap between exports and imports is closing fast:

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