Signs of economic slowdown are becoming more evident
25 July 2024
The seasonally adjusted capacity utilization rate (CUR) fell to 75.9% in July, the lowest level since August 2023 and 0.4 points below its historical average. Real Sector Confidence Index (s.a.) was below the threshold level of 100 for the first time since the pandemic period.
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CBRT kept interest rates unchanged, remains vigilant on liquidity and noted limited rise in inflation trend
23 July 2024
CBRT kept the policy rate unchanged at 50% in July, in line with expectations. The key messages and our evaluations are as follows:
- CBRT maintained its hawkish policy stance for the future with the following statements and emphasized that it could take further tightening steps if necessary.
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Inflation expectations remain sticky
22 July 2024
With the lower-than-expected June inflation, the year-end inflation expectation declined to 43.0%. Although the year-end exchange rate expectation decreased from 37.8 to 37.4 and the growth expectation remained almost unchanged, the year-end inflation expectation fell only by 0.5 points, which is more limited than the forecast error in June (0.9 points), indicating that the participants' inflation expectations for the second half of the year deteriorated compared to the June survey.
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Budget deficit significantly below the cash balance
16 July 2024
In June, central government budget balance posted a deficit of 275.3 billion TRY and a primary deficit of 176 billion TRY.
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Current account balance improved markedly in May
12 July 2024
The current account balance posted a deficit of $1.24 billion in May, below expectations. The 12-month cumulative deficit decreased to $25.2 billion.
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Underlying trend of industrial production continues to lose strength
10 July 2024
Industrial Production Index (IPI) rose by 1.7% mom and 2.4% yoy in May. In last month's note, we had expected an increase in the May’s IPI after the decline in April due to the technical recovery stemming from the bridge day. However, the monthly increase in IPI was weaker than the expected technical recovery (estimated around 3.5 pp) regarding to the bridge day. This means that the underlying trend has weakened, as also indicated by leading indicators. The fact that the increase in May was far from compensating the April’s decline was an important sign of the slowdown in industrial sector activity, with production in the April-May period being 3.4% below the first quarter level.
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Annual inflation started to decline; the sustainability of the improvement in the inflation trend will be monitored
03 July 2024
Consumer prices rose by 1.64% in June, well below market expectations. Annual inflation declined from 75.4% to 71.6%, below the midpoint of the CBRT's forecast band (≈ 71.9%). In the first half of the year, the cumulative increase in CPI was 24.73%. In seasonally adjusted terms, the underlying trend of the CPI and core indicators showed a significant decline.
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Holidays led to volatility in external balance
03 July 2024
According to the provisional statistics of the Ministry of Trade, exports decreased by 10.6% yoy to $18.6 billion, while imports decreased by 4.1% yoy to $25.0 billion in June. Thus, foreign trade balance posted a deficit of $6.4 billion, while 12-month cumulative foreign trade deficit increased from $87.1 billion to $88.3 billion.
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Production and employment weakens in manufacturing industry
01 July 2024
Istanbul Chamber of Industry Turkey Manufacturing Purchasing Managers' Index (PMI) reached its lowest level this year with 47.9 in June.
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Both domestic demand and net exports drove growth in Q1
31 May 2024
Gross domestic product (GDP) increased by 5.7% in the first quarter, in line with our expectations and those of the market. Quarter-on-quarter growth was strong at 2.4%. After this strong quarterly performance, the question is whether the recent tightening steps will lead to a slowdown in the second quarter.
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Disinflation path remained mostly intact
09 May 2024
Forecasts
In the 2024-II Inflation Report, the CBRT updated its 2024 year-end inflation forecast from 36% to 38%, while keeping its 2025 and 2026 year-end forecasts unchanged at 14% and 9%, respectively (Chart 1). The uncertainty band around the year-end forecast was set as 34%-42% for 2024 and 7%-21% for 2025.
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Macro: Demand conditions limited production in manufacturing industry
02 May 2024
Istanbul Chamber of Industry's Turkey Manufacturing Purchasing Managers' Index (PMI) decreased by 0.7 points to 49.3 in April, returning back to contraction zone after two months.
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Weaker growth in Q1 than leading indicators implied
31 May 2023
In Q1, growth was weaker than our expectations and continued to be driven by domestic demand
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Annual headline inflation increased to 83.45% yoy, with the core C hitting 68.09%
03 October 2022
CPI inflation was below the market expectations in September with 3.08% monthly increase. As a consequence, annual inflation rose from 80.21% to 83.45%, setting another yoy record in the revised series (2003=100).
The continuing upward trend in inflation was mainly driven by the contribution of housing, food, household equipment, restaurants-hotels and transportation. Core-B index also hiked by 2.74% MoM, bringing its annual rate to 74.63%, up from August’s 72.53%.
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CBRT decision: Emphasis on risks on global growth and inflation
23 June 2022
Risks on global growth and already high global inflation continue. The divergence of monetary policy steps and communications of developed countries' central banks are increasing due to their diverse economic Outlook.
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