GDP in Turkey, published today by the State Institute of Statistics, fell by 6.3% in Q3. This is the steepest quarterly decline since 1994; however, by itself, the drop would seem little cause for alarm. The Turkish economy is very volatile; since the beginning of 2000, quarterly growth has averaged 0.9%, but it has had a standard deviation of 3.5%! In Q3, consumer spending on durable goods fell after two strong quarters and business capital investment fell after a two-and-a-half-year run-up that averaged 8.6% a quarter. So the Q3 drop occurred in volatile items in an already volatile environment.

The erratic behavior of the Turkish economy probably has many causes. One of them is surely the substantial structural inflation. In the table below, we show the GDP price deflator. Its latest figure, 317,129, is an index which was 100 in 1987. This inflation trend has been slowing down, though, and the last two quarters show year-on-year increases less than 10%, the first under double-digits since this data began in 1987.

The weakest industries in Q3 were forestry and wholesale and retail trade. Manufacturing and transportation also saw declines. Turkey has been known for millennia as a trading center, particularly the huge port of Istanbul. This is reflected in the industrial structure of the economy today. Transportation, communications and trade together constituted almost 34% of GDP in Q3; in the Euro-Zone by contrast, activity in these sectors was only 21% of the region's GDP. So declines in trading activity exert a considerable brake on overall Turkish performance.

Data on Turkey are contained in Haver's EMERGEMA database.