bne -

Indicators released on November 1 painted an unclear picture in the Turkish economy, with business apparently pushing forwards but consumers exhibiting severe uncertainty.

Turkish manufacturing data released by HSBC provided hope that the economy may have accelerated towards the end of the third quarter and the beginning of the fourth. The Purchasing Managers Index edged higher for the third month in a row to leave it at 52.5 in October, compared with September's 52.2, hinting at continued improvement in the pace of growth. A reading above 50 indicates expansion, and the October figure is the highest of the last 12 months.

Erste Bank points out that the sub-indices were also healthy. "The output index advanced to 53.9 from 53.5, while the new orders component rose to 52 from 51, which were favorable signals regarding the sustainability of the uptrend going forward," analysts wrote.

The expansionary trend is particularly notable for its contrast to many other CEE countries. The likes of the Czech Republic and Poland have been suffering poor PMI reports in recent months as export demand from their main markets in the Eurozone continue to cool.

However, Turkey is far less exposed to Europe, as Capital Economics points out. "One reason behind [the strong PMI reading] is the resilience of external demand - with Turkey benefiting from trade ties to nearby countries in the Middle East and North Africa. The Turkish new export orders component was the only one in the region to rise in October. Meanwhile, data released yesterday showed that exports rose by 21% y/y (in US dollar terms) in September."

However, the apparent improvement has not been noticed outside the commercial world, as consumers eye rising regional tension, alongside a host of tax hikes enacted by Ankrara recently. The same day as the PMI release, the CNBC-e Consumer Confidence Index reported a fall of 9.7% month on month in October, to leave it at its lowest level since March 2009.

"The decline was related to the deterioration in both the Consumer Expectations Index and Consumption Tendency Index, which dropped by 5.9% m/m and 9.8% m/m, respectively," point out the Erste anslysts. "The geopolitical risks, along with the administered price hikes and tax adjustments, may have amplified the souring in sentiment. Consumer Confidence fell by a visible 14% year to date as of October, and the renewed downtrend since 3Q12 suggests that the recovery in the economic activity expected for 4Q12 would be a moderate one."