Jan Manufacturing - New Orders and Turnover

• Turkey reported manufacturing new orders up 17.4% YoY in January, with orders for capital goods up 26.9% YoY, orders for consumer durables up 26.1% YoY, intermediates up 14.7% and consumer non-durables up 12% YoY.
• Manufacturing turnover, meanwhile, was up 15.1% YoY in January, led by a 31.1% YoY rise in consumer durables, 17.4% rise in capital goods, 13.9% rise in intermediates and 13.5% YoY rise in consumer non-durables.

Both these indicators suggest a modest by sustained recovery in momentum terms from the doldrums of mid-2011.

Although in YoY terms new orders are rising slightly more quickly than turnover, the difference is neither large nor informative. In terms of underlying momentum, both tell the same story: (new orders, January was a sequentially quite weak month, following the surprising strength in December. The six month momentum trendline for both tells us that Turkey's manufacturing sector is running very slightly above trend: if maintained, this would imply turnover growth slowing to around 20% this year, down from 27.9% last year.  

My estimate (based on depreciating all gross fixed capital formation over a 10-year period) is that Turkey's capital stock grew around 17% last year, with its growth still accelerating (as the rises in capital goods manufacturing – 26.9% YoY in turnover, and 17.4% YoY in new orders tells us). In which case, manufacturing turnover growth of around 20% doesn't leave a great deal of room for error (policy error, for example) before asset-turns begin to deteriorate, taking returns on capital with it.

Today's two data-points also do not change the industrial story for January already detailed by earlier data: industrial output up 1.6% YoY, exports up 28% YoY (in nominal lira terms), and the PMI slowing modestly to 51.7 (from 52 in December). Those indicators, together with capacity utilization, go to make up my Industrial Momentum Indicator, which shows how current conditions deviate from long-term seasonalized trends – with the deviation expressed in numbers of standard deviations. Both suggest a modest but sustained recovery from the doldrums of mid-2011.