Download 2. I E D

Central Bank of the Republic of Turkey
2. International Economic Developments
Data released in the past quarter point that global economic activity has
not settled into a notable track of recovery. The banking crisis in the Southern
Cyprus, the slower-than-expected rate of growth in the Chinese economy and
the easing policies enforced by the BoJ stood out as the featuring
developments.
Following the publication of the January Inflation Report, economic
activity in the Euro Area decelerated further, thus leading to a notable
downward revision in the growth rate forecast for 2013. In spite of the measures
taken to solve the problems in the Euro Area, the banking crisis in the Southern
Cyprus proves that risks to the financial system are still in place.
Having diverged from other advanced economies by registering a 1.6
percent rate of annualized growth in the last quarter of 2012, the US economy
still recorded the lowest rate of growth of the last 1.5 years. Furthermore, in the
first quarter of 2013, the US economy posted a lower-than-expected rate of
growth by 2.5 percent in annualized terms, implying that the effects of the
tightening fiscal measures are manifested. Cutbacks in budget expenditures will
continue to pose downside risks to the US growth in the forthcoming period.
Commodity prices crept up in the first quarter of 2013, while commodity
prices excluding energy posted a decline. Having edged down in advanced
economies, annual consumer inflation rates followed an upward course in
emerging economies in the same period. Also owing to the low rate of global
inflation, monetary policy decisions were mainly shaped by concerns of growth,
while both advanced and emerging economies continued with monetary
easing in the said period. Accordingly, driven mostly by monetary policies in
advanced economies, the global monetary policy is expected to remain loose
in the period ahead.
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Central Bank of the Republic of Turkey
2.1. Global Growth
Amid increased economic activity in emerging economies in the last
quarter of 2012, global economic activity also moved slightly upwards. As for
advanced economies, despite continuing monetary easing policies to support
economic activity, growth remained sluggish in the last quarter of the year.
Meanwhile, countries with major shares in Turkey’s exports also maintained a
poor growth outlook in the said quarter (Charts 2.1.1 and 2.1.2).
Chart 2.1.1.
Chart 2.1.2.
Global Growth Rates*
Global Growth Rates*
(Annual Percent Change)
(Annual Percent Change)
Emerging Economies
GDP-Weighted Growth
Export-Weighted Growth
6
6
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2007
2008
2009
2010
2011
2012
* Weighted by each country’s share in Turkey’s exports for exportweighted indices.
Source: Bloomberg, CBRT.
Advanced Economies
10
10
8
8
6
6
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2007
2008
2009
2010
2011
2012
* Weighted by each country’s share in global GDP.
Source: Bloomberg, CBRT.
In the last quarter of 2012, the US economy posted a quarterly growth of
1.6 percent (annualized), the lowest figure of the last 1.5 years. Private
consumption and investment besides imports contributed positively to growth in
contrast to the negative contribution of public consumption and investment
besides exports. Having undershot the expectations, the US economy recorded
a 2.5 percent growth in annualized terms in the first quarter of 2013. This was
interpreted as a manifestation of the cutbacks in public expenditures on the US
economy.
The Euro Area economic activity continued with an unfavorable course in
the last quarter of 2012, posting a year-on-year contraction by 0.6 percent in
2012. Meanwhile, the PMI data suggest that this contraction would continue in
the first quarter of the year as well (Chart 2.1.3). Having projected a positive
growth for the Euro Area in 2013 in the previous reporting period, the Eurostat
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envisioned that the Euro Area would contract further in 2013 and growth would
recede by 0.6 percent; and positive growth figures would be attained by 2014.
Thus, the Euro Area is expected to further adversely affect the global growth
outlook in 2013.
Chart 2.1.3.
The Euro Area PMI Indices
Services
Manufacturing
35
30
30
0313
35
0912
40
0312
40
0911
45
0311
45
0910
50
0310
50
0909
55
0309
55
0908
60
0308
60
Source: Bloomberg.
As for emerging economies, having followed a 7.9 percent growth rate in
the last quarter of 2012, the Chinese economy unexpectedly lost pace in the
first quarter of 2013, and grew by 7.7 percent, also bringing about concerns for
a new “low growth” period. The languish industrial sector and the lower-thanexpected retail sales led to low growth, while also causing stronger perceptions
that the expansionary monetary policy were not as effective as expected on
the real sector.
The PMI data regarding the global economic activity point that both the
manufacturing and the services sectors posted a slight growth in the first quarter
(Chart 2.1.4). Further measures were taken in advanced economies to bolster
economic activity, thus causing economic activity to edge up. Notwithstanding
the globally loose monetary policy, persisting problems regarding the Euro Area
crisis continue to create uncertainty regarding the course of global growth in
the period ahead. According to Consensus Forecasts, global growth forecasts
for end-2013 remained unchanged in the inter-reporting period; while Euro Area
growth forecast for end-2013 was revised considerably downward (Table 2.1.2).
GDP and export-weighted global production indices that are updated by April
Consensus Forecasts confirm that no evident recovery is expected in external
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Central Bank of the Republic of Turkey
economies in the forthcoming period, and global uncertainties will continue to
restrain external demand (Chart 2.1.5).
Chart 2.1.4.
Chart 2.1.5.
JP Morgan Global PMI Indices
Global Production Indices*
(2008Q2=100)
Services
January 2013 (Export-Weighted)
April 2013 (Export-Weighted)
January 2013 (GDP-Weighted)
April 2013 (GDP-Weighted)
Manufacturing
65
112
65
60
60
55
55
50
45
110
112
110
108
108
106
106
50
104
104
45
102
102
100
100
40
40
35
35
96
30
94
98
0313
0912
0312
0911
0311
0910
0310
0909
0309
0908
0308
30
98
Actual
Forecast
1234123412341234123412341234
2007 2008 2009 2010 2011 2012 2013
96
94
* Weighted by each country’s share in Turkey’s exports for exportweighted indices.
Source: Bloomberg, Consensus Forecasts, CBRT.
Source: Bloomberg.
Table 2.1.2.
Growth Forecasts for end-2013 and end-2014
Consensus Forecasts
(Average Annual Percent Change)
January
April
2013
2014
2013
2014
2.6
3.2
2.6
3.2
-
-
-
-
USA
2.0
2.8
2.1
2.7
Euro Area
World
Advanced Economies
-0.1
0.9
-0.4
0.9
Germany
0.7
1.7
0.7
1.7
France
0.1
0.8
-0.1
0.7
Italy
-0.9
0.5
-1.4
0.5
Spain
-1.6
0.3
-1.6
0.2
Greece
-4.5
-1.3
-4.9
-1.4
Japan
0.7
1.0
1.3
1.3
UK
1.0
1.7
0.7
1.6
-
-
-
-
Asia-Pacific
6.6
6.8
6.6
6.7
China
8.1
8.0
8.2
8.0
India
6.5
-
6.1
6.8
3.5
3.9
3.4
3.8
3.3
3.9
3.1
3.7
2.9
3.9
2.7
3.6
Emerging Economies
Latin America
Brazil
Eastern Europe
Source: Consensus Forecasts.
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2.2. Commodity Prices
In the first quarter of 2013, commodity prices edged up on a quarterly
basis, while commodity prices excluding energy posted a decline. In the said
period, energy prices went up by 2.4 percent; while, industrial metal, precious
metal and agricultural prices increased by 0.9, 6.4 and 7.4 percent, respectively
(Chart 2.2.1).
Chart 2.2.1.
Chart 2.2.2.
S&P Goldman Sachs Commodity Prices Indices
WTI – Brent Prices
(January 2009=100)
(USD/bbl)
Headline
Industrial Metals
Agriculture
Brent
WTI
Spread (right axis)
Energy
Precious Metals
280
280
240
140
30
130
25
240
120
200
200
20
110
15
100
160
160
120
120
10
90
5
80
Source: Bloomberg.
0413
0113
1012
0712
0412
0112
1011
0711
0411
0111
1010
-5
0710
60
0410
0
0110
0113
0712
0112
0711
0111
0710
0110
0709
80
0109
80
70
Source: Bloomberg.
In the first quarter of the year, Brent and WTI oil prices crept up on a
quarterly basis. However, by mid-April, both Brent and WTI prices trended
downwards, and recorded a quarter-on-quarter decline by 13 and 7 percent,
respectively (Chart 2.2.2). The lack of a sign for a permanent recovery in
employment indicators despite positive growth in the US economy; and the
widespread expectations that the contraction in the Euro Area will persist across
2013 will likely to contain demand pressure on oil prices. Furthermore, both the
high course of US crude oil stocks (Chart 2.2.3) and expectations that the
current production levels will be maintained in OPEC countries indicate
absence of an upward supply-side pressure on crude oil prices. In short, despite
persisting political issues in the Middle East, an evaluation of supply and
demand conditions suggests that oil prices will remain on a downward path in
the forthcoming period. In fact, 18-month forward contracts show that oil prices
remained virtually unchanged in the inter-reporting period (Chart 2.2.4).
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Central Bank of the Republic of Turkey
Chart 2.2.3.
Chart 2.2.4.
Crude Oil (Brent) Prices*
Crude Oil Inventories in the US
(USD/bbl)
(Million barrel)
Futures (Jan 25)
Spot
400
400
350
Futures (Apr 26)
140
140
120
120
100
100
80
80
60
60
40
40
350
300
250
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
250
Source: The US Department of Energy.
0109
0509
0909
0110
0510
0910
0111
0511
0911
0112
0512
0912
0113
0513
0913
0114
0514
0914
300
*Futures (Jan 25) and Futures (April 26) denote the arithmetical
average of the prices quoted in futures contracts during January 1
and 25, 2013 and April 1 and 26, 2013, respectively.
Source: Bloomberg.
WTI and Brent oil prices converged gradually in 2013. The Brent-WTI
spread, which was USD 22.3 in the last quarter of 2012, receded to USD 10.6 by
mid-April (Chart 2.2.2). The closing of the spread against developments to curb
the external dependency of the US in energy is attributed to the more robust
growth of the US economy compared to Europe.
Having increased further in the first half of 2012, agricultural prices
remained below 2011 levels throughout 2012; and continued on a downward
trend in the first quarter of 2013 by registering a 7.4 percent fall (Chart 2.2.1).
However, the future course of agricultural prices remains uncertain due to
weather conditions. Hence, both downside and upside risks are brisk throughout
2013.
The course of global growth is still the main determinant of energy and
industrial metal prices. Besides economic uncertainties, the monetary easing
policies implemented in the US, the Euro Area and Japan to bolster the
economy and achieve financial stability are influential on precious metal prices.
In the meantime, supply-side developments render it possible for commodity
prices to change in both sides.
2.3. Global Inflation
In the first quarter of 2013, headline and core consumer inflation rates
posted a limited decline in advanced economies. Having declined slightly in
March, inflation rates registered an increase in emerging economies in the interreporting period (Charts 2.3.1 and 2.3.2). The fall in commodity prices excluding
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Inflation Report 2013-II
Central Bank of the Republic of Turkey
energy in the said period supported the flat course in inflation rates; and
growth, which was languish particularly in advanced economies, did not exert
a demand pressure on inflation.
Chart 2.3.1.
Chart 2.3.2.
CPI Inflation in Advanced and Emerging Economies
Core Inflation in Advanced and Emerging
Economies
(Annual Percent Change)
(Annual Percent Change)
Emerging Economies
Advanced Economies
Emerging Economies
Advanced Economies
2
2
0
0
1
1
-2
-2
0
0
1212
1209
0609
1208
0608
0113
2
Source: Bloomberg, CBRT.
6
0712
2
0112
3
0711
3
0111
4
0710
4
0110
4
0709
4
0109
6
0708
6
0108
5
0612
5
1211
8
0611
8
1210
6
0610
10
10
Source: Bloomberg, Datastream, CBRT.
In the first quarter of 2013, the Euro Area inflation compensation edged
down, while inflation compensation edged up in the US. Growing perceptions
that the contraction in the Euro Area will persist in 2013 accompanied by further
support to troubled countries in the region were influential on the fall in
compensation rates. On the other hand, the US inflation expectations, which
were expected to rise plausibly in 2013, remained broadly unchanged.
Nevertheless, inflation compensations in both regions have moved slightly
upwards since the midst of March (Chart 2.3.3).
Chart 2.3.3.
Inflation Compensation in the US and the Euro Area
(Percent)
3.5
Euro Area
3.5
USA
0.5
0.0
0.0
0313
0.5
0912
1.0
0312
1.0
0911
1.5
0311
1.5
0910
2.0
0310
2.0
0909
2.5
0309
2.5
0908
3.0
0308
3.0
Source: Bloomberg.
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Central Bank of the Republic of Turkey
Global inflation forecasts suggest no change for end-2013, while a slight
upward revision for end-2014 (Table 2.3.1). Forecasts for the Euro Area were
revised downwards both for end-2013 and end-2014, while for the US economy,
the forecasts remained unchanged. Inflation forecasts for Japan were revised
upwards for both 2013 and 2014; and it was envisioned that Japan will start to
experience inflation starting from 2013. On the other hand, the course of
commodity prices, which remained flat in the first quarter of the year, is not
considered to be a pressure and a risk factor on global inflation rates in the
period ahead. In addition, steps taken by advanced economies to revive the
shrinking and languish economies do not produce favorable expectations, and
accordingly, no upside pressures are thought to be present on inflation rates in
advanced economies in the forthcoming period.
Table 2.3.1.
Inflation Forecasts for end-2013 and end-2014
(Annual Percent Change)
World
Advanced Economies
USA
Euro Area
Germany
France
Italy
Spain
Greece
Japan
UK
Emerging Economies
Asia-Pacific*
China
India
Latin America
Brazil
Eastern Europe
January
2013
2014
2.8
3.0
1.9
2.1
1.9
1.7
1.9
2.0
1.5
1.8
2.0
1.8
2.3
1.5
0.2
1.4
-0.2
1.6
2.6
2.3
3.9
3.9
3.2
3.4
7.6
6.8
6.4
6.3
5.5
5.6
5.4
4.7
April
2013
2.8
1.9
1.7
1.7
1.2
1.9
2.0
-0.1
0.1
2.9
3.9
3.2
8.2
6.6
5.7
5.2
2014
3.1
2.1
1.6
2.0
1.6
1.7
1.5
1.3
1.9
2.5
4.0
3.5
7.4
6.5
5.7
5.0
* Denotes estimates excluding Japan.
Source: Consensus Forecasts.
2.4. Financial Conditions and Risk Indicators
The first quarter of 2013 was marked by persisting uncertainties, especially
due to risks regarding the Euro Area; and the global risk appetite recorded a
decline in this period (Chart 2.4.1). Despite the resolute stance of the ECB
besides the Euro Area governments, both the election results in Italy as well as
the financial crisis and the banking crisis in the Southern Cyprus deteriorated the
risk perceptions regarding the region. The post-election shares of votes in Italy
challenged the establishment of a government and the resulting concerns over
political stability led to the downgrade of the country’s credit rating and an
increase in bond yields (Chart 2.4.2).
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Chart 2.4.1.
Chart 2.4.2.
Global Risk Appetite
Yield Spread over German Bonds in GIIPS
Countries *(Percent)
Greece (left axis)
Ireland
Italy
Credit Suisse Risk Appetite Index
VIX (inverted, right axis)
6
10
4
15
2
20
0
25
Portugal
Spain
40
15
12
30
9
20
6
10
3
0113
0712
0112
0711
0111
0
0110
0
0710
45
0113
-8
0712
40
0112
-6
0711
35
0111
-4
0710
30
0110
-2
* GIIPS countries are Greece, Ireland, Italy, Portugal and Spain.
Source: Bloomberg.
Source: Bloomberg, Credit Suisse.
In the first quarter of the year, the OIS spread, which shows the
counterparty risk in money markets, decreased for the US and increased for the
Euro Area. Meanwhile, the euro–USD cross currency swap rate has increased
since February (Charts 2.4.3 and 2.4.4).
Chart 2.4.3.
Chart 2.4.4.
OIS Spread
Euro/USD Cross Currency Swap Rate
(3-Month, Points)
(1-Year, Basis Points)
Euro
USD
-60
-60
0.2
0.2
-80
-80
0.0
0.0
-100
-100
0710
0110
0113
0.4
0712
0.4
0112
-40
0711
-40
0111
0.6
0710
0.6
Source: Bloomberg.
0
0110
-20
0113
-20
0712
0.8
0112
0.8
0711
0
0111
1.0
1.0
Source: Bloomberg.
According to the ECB’s bank lending survey for the first quarter of 2013,
tight credit conditions in the banking sector were slightly alleviated, while credit
demand was contracted further in the Euro Area (Chart 2.4.5). As per the latest
lending survey released by the Fed, easing in lending conditions continued
through the last quarter, and the loan demand of not only the large and
medium-size but also of small-size firms increased in the US (Chart 2.4.6).
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Central Bank of the Republic of Turkey
Chart 2.4.5.
Chart 2.4.6.
The ECB Bank Lending Survey*
The Fed Lending Survey*
(Percent)
(Percent)
Loan Standards (Large Firms)
Loan Standards (SME)
Loan Demand (Large Firms)
Loan Demand (SME)
Loan Standards (LME)
Loan Standards (SE)
Loan Demand (LME)
Loan Demand (SE)
100
100
75
75
75
75
50
50
50
50
25
25
25
25
0
0
0
0
100
100
* Upward movements denote tightening in credit conditions.
Source: ECB.
2012
2011
2010
2009
2008
2007
2006
2013
2012
2011
-75
2010
-75
2009
-75
2008
-75
2007
-50
2006
-25
-50
2005
-25
-50
2004
-25
-50
2003
-25
* Upward movements denote tightening in credit conditions.
Source: Fed.
In the first quarter of the year, increased number of investors were
attracted to stock markets in advanced economies, in particular the US; and
the MSCI index of advanced economies soared in contrast to the plummeting
performance of stock markets in emerging economies (Chart 2.4.7). In the same
period, yield indices for borrowing bills of emerging economies recorded an
increase (Chart 2.4.8).
Chart 2.4.7.
Chart 2.4.8.
Global Stock Markets
Regional EMBI Developments
(USD, 2007=100)
MSCI - Emerging Economies
MSCI - Advanced Economies
Global
Source: Bloomberg.
200
200
100
100
0113
60
300
0712
60
300
0112
70
400
0711
70
400
0111
80
500
0710
80
Asia
500
0110
90
0113
90
0712
100
0112
100
0711
110
0111
110
0710
120
0110
120
Source: Bloomberg.
2.5. Capital Flows
Having trended upwards in the last quarter of 2012, capital flows towards
emerging economies accelerated further in January 2013; but lost pace in the
succeeding months despite the relatively high global risk appetite (Chart 2.5.1).
In the aftermath of January, which was marked by robust inflows towards equity
and bond markets, capital flows trended downwards. The bond funds
plummeted, while equity funds saw outflows in March and April (Chart 2.5.2).
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Chart 2.5.1.
Chart 2.5.2.
Annual Portfolio Flows to Emerging Economies
Monthly Portfolio Flows to Emerging Economies
(Cumulative, Billion USD)
(Billion USD)
Bond Funds
Equity Funds
Bond Funds
VIX Index (inverted, right axis)
Equity Funds
100
100
40
80
80
30
10
60
60
20
20
40
40
20
20
10
30
0
40
0
0
0
Source: EPFR, Bloomberg.
0113
0712
0112
0711
0111
0710
0110
0709
0109
0708
0108
0113
0712
0112
0711
70
0111
-30
0710
60
-60
0110
-20
-60
0709
50
0109
-10
-40
0708
-20
-40
0108
-20
Source: EPFR, Bloomberg.
On a quarterly basis, the composition of capital flows remained
unchanged in the first quarter of the year, in terms of both portfolio and
regional distribution (Table 2.5.1). International investors mainly preferred equity
funds, and emerging Asian economies remained as the most attractive country
group for investors. While capital flows to emerging economies remained
unchanged year-on-year, the volatility of capital flows increased in the first
quarter of the year.
Table 2.5.1.
Composition of Portfolio Flows to Emerging Economies (Quarterly, Billion USD)
Portfolio Composition
Total
2012
2013
Q1
Q2
Q3
Q4
Q1
32.4
-3.5
19.2
42.8
42.9
Equity Funds
21.2
-7.8
7.0
27.9
27.8
Bond Funds
11. 2
4.3
12.1
14.9
15.1
Regional Composition
Emerging
Asia
14.7
-4.0
6.2
24.0
24.5
Emerging
Europe
5.7
0.0
4.5
6.3
6.2
Latin
America
9.3
0.2
6.8
9.9
9.2
MENA
2.7
0.3
1.7
2.7
3.0
Source: EPFR.
The recent quantitative easing policy implemented by BoJ is considered
to be an important factor that may accelerate capital flows to emerging
economies in the upcoming period. Accordingly, owing to both the potentially
robust course of capital flows and heightened volatility, risks to financial stability
in emerging economies are thought to remain brisk in the forthcoming period.
2.6. Global Monetary Policy Developments
In the first quarter of 2013, monetary policies were eased amid the
unfavorable global growth outlook. Advanced and emerging economies
diverged considerably in the said quarter; i.e. while policy rates in emerging
economies continued with a sharp decline, policy rates in advanced
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Central Bank of the Republic of Turkey
economies were stable. Countries such as Sweden, South Korea, the Czech
Republic, Israel and Australia, which opted for policy rate reductions in the last
quarter of 2012, kept their policy rates unchanged in the first quarter of the year
in spite of the room for maneuver. The Fed and the BoJ, which are out of the
four central banks that do not have much room for maneuver, sustained their
monetary easing policies, while the ECB and the BoE slowed down on asset
purchases, and central bank assets, and consequently their shares within the
GDP saw a decline compared to the end of 2012 (Chart 2.6.1). In the
meantime, policy rates were lowered by 50 basis points in India, Mexico and
Turkey; and by 100 basis points in Hungary, Poland and Colombia in the first four
months of the year. Meanwhile, Banco do Brasil delivered a 25 basis points
policy rate hike in April given the overshoot of the inflation target of 6.5 percent.
(Chart 2.6.2).
Chart 2.6.1.
Chart 2.6.2.
Central Bank Assets to GDP*
Policy Rate Changes in Emerging Economies from
Jan. 2010 to Apr. 2013* (Basis Points)
ECB
BoJ
Jan'13
Oct'12
2007
2008
* Estimate for 2013Q1GDP.
Source: Bloomberg, CBRT.
2009
2010
2011
-300
-300
-500
-500
2012 2013
Romania
-100
Turkey
0.0
1 23 4 12 3 4 12 34 1 2 34 1 23 4 1 23 41
-100
South Africa
0.0
100
Russia
0.1
100
Hungary
0.1
300
Indonesia
0.2
300
Poland
0.2
500
Colombia
0.3
Nov'12
2012Q1-Q2
500
Peru
0.3
Dec'12
2012Q3-Q4
Thailand
0.4
Chile
0.4
Brazil
FED
BoE
* As of April 29, 2013.
Source: Bloomberg, CBRT.
As for the monetary policy implementations in advanced economies, the
Fed implemented further monetary easing and continued with bond purchases
announced by the third monetary easing package. Despite the partial
recovery in the US growth, the Fed envisioned that the earlier projection of 6.5
percent in unemployment rate will not be attained before the last quarter of
2014 and the monetary policy will remain loose for a while. As for Japan, a new
package of expansionary fiscal and monetary policy measures was introduced
to re-settle the economy into a growth path in early April. Accordingly, monthly
bond purchases, which were announced to be JPY 3.8 trillion in the previous
package, were increased to JPY 7.5 trillion (around USD 75 billion). The BoJ
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Inflation Report 2013-II
Central Bank of the Republic of Turkey
showed resoluteness in attaining the goal of 2 percent in inflation and doubling
the monetary base within two years.
In emerging economies, policy rates slowed down further, and in inflationtargeting countries, the GDP-weighted average policy rate went down by 27
basis points in end-2013 compared to end-2012. Policy rate reductions were
attributed to sluggish economic activity, and it was declared by central banks
that these reductions were consistent with their inflation targets.
Chart 2.6.3.
Chart 2.6.4.
Expected Policy Rates in Advanced Economies
Expected Policy Rates in Inflation-Targeting
Emerging Economies
Policy Rate
Expected Policy Rate (January)
Expected Policy Rate (April)
Policy Rate
Expected Policy Rate (January)
Expected Policy Rate (April)
0.85
6.75
0.80
6.50
6.50
0.75
6.25
6.25
0.70
6.00
6.00
0.65
0.65
5.75
5.75
0.60
0.60
5.50
5.50
0.55
0.55
5.25
5.25
0.50
0.50
5.00
5.00
0.45
0.45
4.75
0.85
0.80
0.75
0.70
1
2
3
4
1
2011
2
3
2012
Source: Bloomberg, CBRT.
4
1
2
3
2013
4
1
2014
6.75
4.75
1
2
3
4
1
2011
2
3
2012
4
1
2
3
2013
4
1
2014
Source: Bloomberg, CBRT.
Similar to the previous quarter, the ECB did not deliver the expected
policy rate cut, thus causing the average policy rate in advanced economies
to remain above the level projected in the January Inflation Report (Chart
2.6.3). Meanwhile, the projections that the ECB would implement a 25-basis
points policy rate cut in the second quarter of 2013 were still in place in April. As
for emerging economies, the fall in average policy rate stood far above the
expectations in January (Chart 2.6.4). Expectations for April suggest that
monetary easing in emerging economies ended with this sharp decline. The
upward trend in both the consumer inflation and core inflation indicators in the
said countries challenges the sustainability of policy rate reductions to bolster
economic growth. In fact, expectations also point that the average policy rate
in emerging economies will trend upwards as of the second quarter of the year.
Finally, expectations for end-2013 remained broadly unchanged in April for both
country groups in the inter-reporting period, except for a minor adjustment to
the deviation in the first quarter of the year, thereby resulting into the settlement
to the previous path.
Inflation Report 2013-II
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Central Bank of the Republic of Turkey
Box
2.1
The
Export-Weighted Global PMI Index and the Growth Threshold
Purchasing Managers’ Index (PMI) is a significant indicator released on a
monthly basis entailing qualitative information on the month-on-month change in
the economic activity of a country or a sector. As for countries, the PMI is a
leading indicator for the GDP growth. In this Box, a new global PMI series is
constructed to estimate the export-weighted global growth rates calculated for
Turkey (see Inflation Report 2010-II, Box 2.1) and the threshold PMI value; i.e. the
PMI value corresponding to 0 percent growth rate is calculated.
PMI
figures are calculated by results of a monthly survey responded by the
purchasing managers of firms.1 Accordingly, in a month where all participants
report no month-on-month change in their activities, the PMI value will be 50.
Therefore, the PMI value of 50 is also called the theoretical growth threshold or the
neutral level. By definition, a PMI value above the theoretical growth threshold
corresponds to expansion in the economy; while a PMI value below 50 indicates
contraction. Hence, through a regression analysis in the spirit of Koenig (2002), this
study estimates the PMI value and the growth threshold, which correspond to the
0 percent growth rate, and compares it with the theoretical growth threshold.
The real GDP data for countries included in the calculation of export-weighted
global growth are obtained from Bloomberg (for calculation method, see Inflation
Report 2010-II, Box 2.1). The quarterly GDP data are also seasonally adjusted.
Meanwhile, 34 countries, which are importers from Turkey, are included in the
calculation of export-weighted global PMI and the PMI data are released by
Markit.2 Turkstat dataset is used for the calculation of Turkey’s exports to these
countries. Data on exports and PMI are transformed from monthly to quarterly
frequency, and quarterly PMI is calculated as the simple arithmetic average of
the monthly PMI. The analysis covers the 1999-2012 period.
In the survey, the respondents are asked about the status of their activities compared to the previous month and requested
to select “better”, “worse”, or “unchanged”. Then, total number of participants is normalized to 100 and the ratio of each
answer is calculated according to the percentage of the respondents. The index is calculated with the weight of “better”
being 1; while the weight of “unchanged” and “worse” is 0.5 and 0, respectively.
2 Total share of these countries within Turkey’s exports is around 60 percent.
1
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Inflation Report 2013-II
Central Bank of the Republic of Turkey
The coverage of PMI data by Markit differs for each country and also by sectors.
For each country, the most comprehensive PMI series is chosen with the objective
to find the best leading indicator for the GDP. In case of an absence of the index
for any time period, the second most comprehensive series is employed. For
instance, if a country’s headline PMI starts from 2007, then this series is used for the
succeeding periods; whereas, for the preceding periods, the manufacturing
industry PMI is used. The export-weighted global PMI ( ) is calculated as follows
by using the PMI series that will best lead the GDP growth:
∑
In this equation,
denotes the PMI value of the country i in period t; and
denotes the share of the country i within Turkey’s exports in period t-1.
Export-weighted global PMI and global growth are illustrated in Chart 1, together
with the theoretical growth threshold.3 The chart highlights the frequency of cases
where the PMI value is above (below) the theoretical threshold and the global
growth is below (above) zero, thus signifying the possibility that the actual
threshold for growth may be different.4 Thus, the following simple regression
equation is estimated, where the export-weighted global growth,
dependent variable and the export-weighted global PMI,
is the
is the explanatory
variable:
(
(
)
)
(
)
Respective t-statistics are shown in parentheses. According to this equation, each
1-point increase in the export-weighted global PMI value corresponds to an
increase by 0.1 percentage point in the export-weighted global growth.
The correlation coefficient between the two series is 0.86.
The number of observations corresponding to this case is 14. For example, in the last three quarters, even though the PMI
remains below the theoretical growth threshold, global economy continues to grow.
3
4
Inflation Report 2013-II
33
Central Bank of the Republic of Turkey
Chart 1. Export-Weighted Global PMI for Turkey and
the Theoretical Global Growth Threshold*
Chart 2. Export-Weighted Global PMI for Turkey
and the Growth Threshold*
Export-Weighted Global PMI
Growth Threshold
Export-Weighted Global Growth (right axis)
2.0%
Export-Weighted Global PMI
Export-Weighted Global Growth (right axis)
60
2.0%
60
1.5%
1.5%
55
1.0%
55
1.0%
0.5%
0.5%
50
45
0.0%
50
0.0%
-0.5%
47.5
-0.5%
-1.0%
45
-1.0%
-1.5%
-1.5%
40
-2.0%
40
-2.0%
-2.5%
-2.5%
35
-3.0%
0399
1299
0900
0601
0302
1202
0903
0604
0305
1205
0906
0607
0308
1208
0909
0610
0311
1211
0912
-3.0%
0399
1299
0900
0601
0302
1202
0903
0604
0305
1205
0906
0607
0308
1208
0909
0610
0311
1211
0912
35
* Quarterly data and quarter-on-quarter growth.
Source: Markit, CBRT.
According to the estimation equation, the calculated PMI value corresponding
to 0-percent growth rate is around 2.5 points below the theoretical growth
threshold. The Chart 2 illustrates the growth threshold along with the global PMI
and growth series. As depicted in the chart, growth rates implied by the PMI
according to the threshold value are largely consistent with the actual growth
rates. In other words, while the theoretical growth threshold results in inconsistency
in 14 observations, this figure recedes to 3 with the use of the estimated values for
growth rates. Therefore, in building up expectations regarding the direction of
growth, the use of the estimated growth threshold is more accurate as opposed
to the use of the theoretical growth threshold.
In sum, as a leading indicator for export-weighted global growth, which largely
gauges Turkey’s exports, a global PMI series is constructed and the growth
threshold is estimated using this series. The findings indicate that, compared to the
theoretical growth threshold of 50, the estimated growth threshold is able to
better capture the direction of growth, thus indicating that this estimated series
should be taken into account in analyses.
REFERENCES
Koenig, E. F., 2002, Using the Purchasing Managers’ Index to Assess the Economy’s
Strength and Likely Direction of Monetary Policy, Federal Reserve Bank of
Dallas Economic and Financial Policy Review, 1(6).
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Inflation Report 2013-II