Industrial output fell 17.4 percent from the same month last year, following a decline of 18.5 percent in April, the Ankara-based statistics office said on its Web site Wednesday.
The scale of the contraction has shrunk from a record 23.8 percent in February, supporting central bank predictions the fall in output would "stabilize" in the second quarter. Gross domestic product shrank 13.8 percent in the first three months, the biggest drop since quarterly records began in 1987.
The figures back our view that "despite the slower than expected recovery in industrial production, the outlook on the production side will keep improving in parallel with improvements in domestic demand," Nurhan Toguç, chief economist at Ata Invest in Istanbul, said in an e-mailed report after the announcement. "The Central Bank will keep policy rates on hold for the remainder of the year following an additional 0.25 percentage point cut" when it meets on July 16.
Bonds gained after the announcement, partly reversing earlier losses. Benchmark lira bonds were at 11.66 percent at 10:37 a.m. in Istanbul, 4 basis points higher on the day, according to an index of the securities tracked by ABN Amro Holding NV. Yields had risen as much as 14 basis points before the output figures.
The Bank has reduced its benchmark interest rate by 8 percentage points in as many months, taking it to a record low of 8.75 percent as it seeks to cushion the effects of the global crisis. The Bank will continue cutting unless it sees "clearer signs of economic recovery," it said on June 16. The data "supports the view that the worst is behind us," said Levent Durusoy, an economist for Yatırım Finansman Securities in Istanbul. "But foreign demand is too weak to take output to the levels of previous years."
Exports fell 41 percent to $7.4 billion in May from a year earlier, the statistics agency said on June 30. Imports decreased 44 percent to $10.8 billion.
Manufacturing output dropped an annual 19 percent in May, the statistics agency said. Mining declined 13 percent and utilities such as power producers fell 5.5 percent. Production of automobiles slumped 42 percent.