Turkey’s business confidence index slightly deteriorated in May, mainly due to a 15% m/m decline registered in the sub-index measuring export orders for the next three months, central bank data showed on May 23.

The real sector confidence index hit its bottom level for this year in January, mainly due to a significant depreciation of the local currency plus political uncertainties amid terror attacks and the heated debate over constitutional amendments for a shift to an executive presidency. The government introduced a set of stimulus measures during the first quarter in the build-up to the April 16 referendum on the introduction of the executive presidency.

The consumer confidence index improved as a result by 5.1% m/m in April, after a 3.2% m/m gain registered in March. Business sentiment also hit the recovery path during the three consecutive months from February to a two-year high of 111.2 in April.

The headline business sentiment index declined by 2% m/m to 109.2 points in May from 111.2 in April. May's figure also marked a 1% y/y decline compared to 110.2 in May 2016.

Five of the business sentiment survey’s eight sub-indices improved in May compared to April’s readings. The sub-index for past orders in the last three months showed the highest increase of 6% m/m while the indices measuring current orders, employment for the next three months, capital investments and the general economic situation also showed improvements compared to April.

The sub-index measuring companies’ assessments of the general business outlook rose to 104.8 in April, the highest level since November 2015 when the governing AKP regained its parliamentary majority in a snap poll following five months of prolonged uncertainty after the June 2015 election.

Meanwhile, remaining three sub-indices pointed to significant deteriorations in export orders for the next three months, output volume in the coming three months and the current level of stocks.

The measure for export orders in the next three months fell 15% m/m to 109.6 points in May, the lowest level since December. The decline in export orders also pulled down the sub-index measuring the volume of orders for the next three months by 7% m/m to 117 points in May, the lowest level since January.

Turkey’s exports increased by 4% y/y to stand at $11.9bn in April, slowing from the 19% y/y rise registered in the previous month.

The tense political atmosphere stemming from the ongoing state of emergency, extended in mid-April for another three months, will continue to impair business and consumer confidence, holding back investment and consumption and keeping growth low by historical standards, Moody’s Investors Service warned last month.

Reel Sector Confidence Index
	Sep-16	Oct	Nov	Dec	Jan-17	Feb	Mar	Apr	May
Real Sector Confidence Index	106.1	101.0	103.5	97.6	97.1	105.9	108.9	111.2	109.2
Total amount of orders (Current situation)	88.9	88.7	92.9	90.3	84.8	92.1	92.7	97.2	98.2
Amount of stocks of finished goods (Current situation)	96.7	95.4	100.5	96.1	94.4	100.6	100.4	95.0	94.0
Volume of output (Next 3 months)	121.4	113.0	106.9	98.6	104.3	124.7	129.5	125.2	116.9
Total employment (Next 3 months)	106.5	105.8	105.3	108.2	107.9	112.5	120.9	113.8	114.5
Total amount of orders (Past 3 months)	108.5	97.7	118.1	105.3	98.3	89.9	98.5	117.6	124.8
Export orders (Next 3 months)	124.2	109.7	107.4	102.4	111.8	128.3	125.4	129.3	109.6
Fixed investment expenditure	105.8	105.6	102.3	98.4	101.6	105.1	108.7	110.5	111.0
General business situation	96.5	91.9	94.8	81.7	73.8	93.9	95.3	101.3	104.8
Source: tcmb