Turkey’s economic confidence index moved down by 1.6% m/m to 98.9 in June, retreating to pessimism having hit 100.5 in May, the highest level recorded since November 2015, data from national statistics office TUIK showed on June 29.

The index rose for four months in a row from February to May, with the May figure pointing to optimism (the 100-mark separates optimism from pessimism) among Turkish economic players. However, indexed sentiment was back in the territory of pessimism in June due to deteriorations registered by the consumer, service industry and retail industry confidence indices.

Of the five sub-indices of the country's economic confidence index, only real sector confidence and construction industry confidence posted monthly increases in June.

Turkey's confidence indicators remain under political pressure following the April 16 referendum on shifting to a powerful executive presidency in which Turkish President Recep Tayyip Erdogan sealed a narrow victory based on official results. Domestic and regional tensions are also still being generated by the Syrian and Kurdish crises.

Turkey's consumer confidence index deteriorated by 3.8% m/m to the level of 70 in June, the lowest figure recorded since March’s 67.8.

The TUIK survey for June underscored consumers’ pessimistic views on all sub-items measuring sentiment in regard to the general economic situation, the financial situation of households, the job market for the next 12 months and the probability of saving.

The OECD is forecasting that private final consumption growth in Turkey will decline to 3% in 2017 from 4.1% in 2016.

Turkey’s business confidence index remains a bright spot, rising 3% m/m to 112.4 in June, the highest level recorded since May 2014’s 113.5.

Seven of the business sentiment survey’s eight sub-indices improved in June compared to May’s readings. The sub-index for the general business situation showed the highest increase of 6.3% m/m while the indices measuring current orders, employment for the next three months, capital investments, the current level of stocks and export orders for the next three months also showed improvements.

The seasonally-adjusted confidence index for the construction sector rose by 0.4% m/m to stand at 86.7 in June, following a 0.8% rise in May. Despite the slight recovery in the last two months, the index value for construction confidence is still well below the 100-mark.

Home sales in Turkey grew 7% y/y to 440,226 units in January-April, while Turkey's construction sector calendar-adjusted turnover index rose 5.3% y/y in Q1.

Retail confidence in June deteriorated on a monthly basis following a two-month long path of improvement over the previous two months. The seasonally-adjusted retail confidence index declined 2.1% m/m to 100.7.

Turkish retailers have been recorded as optimistic in the last three months despite the deterioration in June.

Turkish retail sales figures delivered annual contractions for seven consecutive months from October to April despite the government introducing economic stimuli on the way to the referendum, according to the latest data from the TUIK.

The service industry’s seasonally-adjusted confidence index fell sharply by 3.1% m/m to 98.8 in June, pushing the service industry back into pessimism. The industry switched to optimism in May for the first time since July 2016. However, the detected optimism in the service industry survived for just one 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 in April.

The strong loss in momentum that the Turkish economy experienced during 2016 is expected to reverse only gradually as uncertainty recedes during the year, the European Commission said last month. Supported firstly by net trade, momentum is set to improve towards the end of the year as domestic demand benefits from improvements in monetary conditions and confidence, according to the EC.