I F YOU think there’s a contradiction in the headline, you are right, but only at first glance. In fact, there’s nothing wrong with the title because industrial production both increased and decreased in July compared to the same period of the previous year.

But how is this possible? Once again we face a dilemma: Depending on the context, both the “increased” and “decreased” arguments can be true.

THE RAW AND ADJUSTED INDICES

When calculating industrial production, the first stage is to determine the non-adjusted index. This is the raw data, how many fridges, how many tons of paper, how many meters of fabric, etc. that we produced.

The GDP calculation takes this index shows into consideration.

So, according to the non-adjusted index, industrial production was 0.9% below the levels in the same month of the previous year, showing a decline.

But for the same month, data showed that industrial production increased by 4.4%. This result is also accurate course. Here is the logic behind this calculation: If the workdays for July in 2019 and 2020 were the same, this year’s production was going to be 4.4% higher than last year’s. Production, according to the non-adjusted index, shows the actual production level. The seasonally-adjusted – or 4.4% increase – measures the rate of production for industry.

This is undoubtedly a valuable metric. Essentially, it is saying:

If the number of workdays days had been the same, industrial production would have have increased by 4.4%. But since the workdays were reduced, overall production was down. As a result, the -0.9% index and the 4.4% index in July are both true.

Which one is more relevant depends on what purpose they will serve. If you are going to estimate domestic income, you will use the 0.9% decline in the raw index. But if you are going to measure industry’s performance, the correct rate is the 4.4% increase.

TABLES WILL TURN IN AUGUST

The non-adjusted index stood at 99.1 in August 2019. Even if the index, which was 119.3 in July, declines slightly, around an annual 15% increase should be expected for 2020 August. It seems like the increase should not be above 7%-8%, according to the seasonally-adjusted index.

Home sales do not reflect real figures

CAN AN institution evaluate statistics about sales of two different things from very different perspectives and make the announcement accordingly? Well, the Turkish Statistical Institute (TurkStat) has done exactly that! One of the statistics is home sales; the other is vehicle sales. But there are very important differences in the recording and announcement methods of these statistics.

Right off the bat, the correct statistic is the one that shows vehicle sales. House sales statistics do not reflect the real figures.

HOME SALES OUTLOOK

TurkStat announced the August home sales figures last week. Total home sales increased by 54% to 170,000 in August compared to the same month of the previous year. The sales in the first eight months of the year rose by 43%, reaching 1.025 million.

Out of 170,000 houses sold in August, 52,000 were first sales. Over the first eight months of the year, first sales constituted 318,000 of the 1.025 million total sales. So, secondhand house sales constituted 70% of total sales both in August and the January-August period.What does this 70% of secondhand home sales contribute to the economy? What kind of a contribution does it make, if we don’t include those who bought a house and made renovations to it, or those who received a commission from the sales and the government’s tax collection? There are none!

First sales are what’s important here. If a house whose construction is completed in 2020 and is sold for the first time in the same year changes hands every five years, that means it changed owners four times, including in 2020. There’s also the first sale, so it means this house was sold five times.

What we have here are one home and five sales!

The announcement of house sales statistics through total sales prevents us from seeing the real numbers. That’s why we have to consider first sales.

For example, I sold the house that I bought five years ago, bought a secondhand house from someone else, and the person who sold me this second house had two houses. He went on to put the money he acquired from the deal into the bank. So two houses were sold. But did this sale contribute anything to the construction sector, or did the housing stock decrease?