The Turkish economy grew by 1.6 percent year-on-year in the third quarter of 2018, slowing from an upwardly revised 5.3 percent expansion in the previous three-month period and below market expectations of 2 percent. This was the weakest growth rate since a contraction in the third quarter of 2016, as household consumption and government spending increased at a softer pace while investment fell. On the other hand, net external demand contributed positively to the expansion as a weak lira boosted exports.
On the expenditure side, household consumption increased 1.1 percent in the third quarter, after a 6.4 percent jump in Q2; and government spending went up at a softer 7.5 percent (vs 7.8 percent in Q2). In addition, fixed investment slumped 3.8 percent, following a 4.2 percent rise in the previous period. Net external demand contributed positively to the GDP growth, as exports jumped 13.6 percent (vs 4.2 percent in Q2) and imports tumbled 16.7 percent (vs 0.2 percent in Q2) due to a weak lira.
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On the production side, services output grew at softer 4.5 percent (vs 8.9 percent in Q2), mainly due to public administration, education, human health and social work activities (10.2 percent vs 12.4 percent); financial and insurance activities (7.4 percent vs 11.8 percent); and information and communication (3.5 percent vs 7.2 percent); while professional, administrative and support service activities slumped (-7.8 percent vs -1.2 percent). Real estate expansion, however, accelerated to 2.3 percent in the three months to September from 0.2 percent in the previous period. Meanwhile, industrial production grew by just 0.3 percent (vs 4.2 percent in Q2), driven by manufacturing (0.6 percent vs 4.5 percent) and agriculture expanded by 1.0 percent, reversing a 2.8 percent fall in the previous period. Construction output shrank by 5.3 percent, following a 1.0 percent growth in the second quarter.
On a seasonally adjusted quarterly basis, the economy contracted by 1.1 percent in the third quarter, following a downwardly revised 0.6 percent growth in the previous period.