Turkey’s one and only private sector consumer confidence measures dropped for a second month in a row, affirming Turkstat July data that consumers are becoming less willing to spend. BBVA Turkey wrote in its end-July review of economic activity that “Weak performance recorded in the economic activity in 2Q24, points to the higher-than-expected impact of bridge day effects. Excluding these effects, the contraction in activity becomes moderate but still higher than our expectation. We assess that the risks to our 3.5% growth forecast for 2024 start to be to the downside”.
Consumer confidence in doldrums
Bloomberg HT Consumer Confidence Preliminary Index decreased by 8.44 percent in August compared to the final index of the previous month and reached 58.81, according to BloombergHT news website. BloombergHT is not affiliated with Bloomberg, though is licensed by it to use its name.
The report continues:
Bloomberg HT Consumer Confidence Preliminary Index August data has been published. The index decreased by 8.44 percent in August compared to the final index of the previous month and reached 58.81.
Looking at the details of the index, a decline was observed in the consumer’s perception of the current situation and expectations for the next 12 months.
According to the index, the slowdown in the economy is felt more and more, the increase in the unemployment rate, and the upward movement in inflation on a monthly basis are seen as the main reasons for the sharp decline.
In this context, Bloomberg HT Consumer Expectation Preliminary Index decreased by 10.56 percent compared to the previous month and reached 61.73. On the other hand, as the only bright piece of news in the survey, Bloomberg HT Consumption Tendency Index, which tries to measure the suitability of the current period for purchasing durable consumer goods, automobiles and housing, increased slightly by 1.18 percent to 54.88. As in the previous month, preliminary consumer confidence index data continued to signal a slowdown in domestic demand.
Turkstat July consumer confidence was down, too
Consumer Confidence Index, calculated from the results of the consumer trend survey conducted in cooperation with the Turkish Statistical Institute and the Central Bank of the Republic of Turkey, decreased by 3.1 percent in July to 75.9. Consumer Confidence Index was 78.3 in June, reported official stats agency TurkStat two weeks ago.
The sub-index, which shows the financial situation of the household in the current period, dropped from 78.3 to 75.9 in June. While the financial situation expectation of the household in the next 12 months period decreased from 63.8 to 60.4, the general economic situation expectation in the next 12 months period decreased to 70.8.
BBVA: Economic slow-down becoming pronounced
In its end-July review of Turkey’s economic conditions, BBVA Garanti Turkey research team wrote:
Negative impact of bridge day effects (additional holiday days due to extended religious holidays) do matter much higher than we had previously expected, since 2Q24 growth performance was lackluster, led by mainly 3.9% q/q decline in industrial production.
Turnover indices signaled that industry and trade sectors were the main sectors to lead the correction in 2Q while services and construction seemed to prevent further deterioration.
Leading indicators such as manufacturing capacity utilization rate together with confidence indices and economic tendency surveys signal a continued correction in economic activity in 3Q.
Despite the recent mixed signals, the underlying trend on demand indicators displays an ongoing correction, which we expect to deepen further in 3Q considering tighter financial conditions.
We evaluate that the risks start to be slightly to the downside on our 2024 growth forecast of 3.5% stemming from the slightly higher than expected correction so far and the negative calendar days impact. The magnitude of the expected fiscal consolidation and the duration of tight monetary stance will be decisive on growth outlook.
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