Inflation trend moderated slightly; the sustainability of the improvement will be monitored for the monetary policy stance
04 November 2024
In October, consumer prices rose by 2.88% month-on-month (mom), exceeding market expectations, while annual inflation decreased to 48.6% from 49.4%.
Producer prices increased by 1.3% mom and remained relatively stable, contributing to a decline in annual inflation to 32.2%. The revaluation rate (RRR), which serves as a reference point for various goods and services whose prices will be set by the government at the start of next year, reached 43.9%.
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Imports rebound despite slowdown in credit and activity
04 November 2024
According to the provisional data, the foreign trade balance posted a deficit of $5.7 billion in October, while 12-month cumulative foreign trade deficit narrowed to $77.7 billion.
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Manufacturing industry remained weak
01 November 2024
The Istanbul Chamber of Industry Turkey Manufacturing Purchasing Managers' Index (PMI) increased by 1.5 points to 45.8 in October, but remained significantly below the threshold level and the long-term average, indicating that the weak course in the manufacturing industry was maintained.
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Weakening in production and signs of improvement in demand indicators
25 October 2024
October data indicate that the weakness in the manufacturing industry continues in general, while production has a weaker outlook compared to demand conditions.
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CBRT underlined the growing uncertainty about the pace of inflation improvement and kept rates on hold
17 October 2024
CBRT kept the policy rate unchanged at 50% in October in line with expectations.
While the statements regarding the policy stance, liquidity management and macro prudential steps remained unchanged, the most significant change was the new sentence added to the first paragraph stating that ‘uncertainty about the pace of improvement in inflation has increased’.
Despite this change, we assess the preferred tone of communication as soft (non-hawkish).
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Budget outlook in line with MTP targets as of September
15 October 2024
In September, central government budget balance posted a deficit of 100.5 billion TRY and a primary surplus of 48.2 billion TRY. In seasonally adjusted terms, primary budget balance improved slightly compared to the previous month.
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The revision in services balances reduced the current account deficit
11 October 2024
Current account balance posted a surplus of $4.3 billion in August thanks to the strong seasonality.
In seasonally adjusted terms, despite slight monthly deterioration, the current account remained in balance and the favorable outlook was maintaine
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Partial deterioration in expectations after surprising September inflation
11 October 2024
Higher-than-expected monthly inflation in September led to a deterioration in expectations for the underlying trend, with inflation expectations for the end of this year, the end of 2025 and 5 years ahead rising.
Under these circumstances, no rate cut is expected from the CBRT this month, while 3-month and 12-month policy rate expectations are close to last month's survey, suggesting that some participants have postponed the start of the rate cut cycle and/or changed their expectations on the pace of rate cuts.
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Weakening in industrial production becomes more pronounced
10 October 2024
Industrial Production Index (IPI) declined by 1.6% mom and 5.9% yoy in August, in line with the leading indicators pointing to a more pronounced slowdown.
On a quarterly basis, IPI declined by 1.5%. However, excluding bridge day effects, we calculate that the quarterly contraction was sharper at 3.9%, as the slowdown in the underlying trend spread across sectors and accelerated compared to the second quarter.
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No rebalancing in demand components despite the slowdown
02 September 2024
In the second quarter, GDP grew by 2.5% yoy, below the forecasts, while seasonally and calendar adjusted GDP grew by 0.1% qoq, above the forecasts. Thus, Turkish economy grew by 3.8% yoy in the first half of the year.
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Inflation forecasts remain intact under an extended tight policy stance that will ensure a sustained economic cooldown and real appreciation
08 August 2024
In the 2024-III Inflation Report, the CBRT kept its year-end inflation forecasts for 2024, 2025 and 2026 unchanged at 38%, 14% and 9%, respectively (Chart 1). Compared to the previous report, the maturity remaining until the year-ends shortened, but the forecast band was kept unchanged due to increased uncertainties (34%-42% for end-2024, 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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