U.S. News

UPDATE 1-Turkey March industry output up 21 pct yr/yr


ISTANBUL, May 10 (Reuters) - Turkey's industrial output was up 21.1 percent on the year in March, data showed on Monday, underscoring expectations of robust recovery but sending another warning to the Central Bank of inflationary pressures. The Turkish economy is believed to have grown in double digits in the first three months of 2010, albeit from a low base. In March of 2009 output had fallen 20.9 percent. While Turkey is set to enjoy one of the fastest recoveries among emerging markets in 2010, inflation is running well in excess of the Central Bank's target of 6.5 percent. Not wishing to endanger the recovery, the bank has pledged to hold rates at a record low until the fourth quarter. The Turkish Central Bank has also said tax hikes and exceptional factors have pushed prices up, and that it sees inflation beginning to trend downwards towards the end of the year and returning to a more moderate rate in 2011. "Mainly on the back of a weak base, industrial output jumped 21.1 percent. Sequential growth was more modest but was still significant," Yarkin Cebeci of JP Morgan wrote in a note. "High growth rates were secured in the vast majority of subsectors, showing that the growth momentum was broad-based." But he added: "From a monetary policy perspective, high industrial production growth implies that the output gap is shrinking fast and could jeopardise the disinflation process." Most economists expect the bank to begin raising interest rates in the third or fourth quarter, and project increases of 200 basis points by the end of this year. (Writing by Thomas Grove and Alexandra Hudson; Editing by Kevin Liffey) Keywords: TURKEY OUTPUT/ (Istanbul newsroom tel +90 212 350 7122; email: istanbul.newsroom@reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.