Business sentiment and capacity usage rates in Turkey's key manufacturing industry deteriorated in October after both indicators showed a surprising recovery in September, data from the central bank showed on October 25.

The business confidence index decreased by 4.5% m/m in October to 101.7 points, the lowest level over the past 12 months. The decline came as eight of the nine sub-indices deteriorated. The sharpest decrease was recorded in the sub-index evaluating orders received over the past three months.

The decrease in confidence reflects worries over renewed political uncertainty in the run-up to a referendum that could change the country’s political system along with rising tension with Iraq and Syria and ongoing clashes with PKK in the southeastern provinces of the country. Moreover, Moody’s decided to cut Turkey’s rating to junk last month.

The main stock exchange index, BIST-100, was up 0.44% and the lira recovered by 0.22% to trade at 3.0732 per dollar as of 15:18 local time on October 25.

Separately, statistics office TUIK announced on October 25 the results of its monthly confidence survey for the construction, retail and service industries. The figures showed business sentiment in all three sectors deteriorated in October.

The seasonally-adjusted business sentiment index for Turkey’s construction sector declined by 0.8% m/m in October, following a 3.2% m/m increase in September. The retail confidence index declined for the third consecutive month, falling by 1.8% m/m. Confidence in the service sector declined by 1.8% m/m, versus a recovery of 5.7% m/m in September.

Data from the central bank, also released on October 25, showed the manufacturing sector capacity rate decreased to 76.4% in October from 76.6% a month earlier.

Capacity utilisation in durable goods, on the other hand, rose from 74.9% to 76.7%, while the usage in the consumer goods industry decreased from 73.2% to 72.1%. In the food sector, the usage rate stood at 69.7% in October, down from 70.9% in September.

TUIK reported that the capacity utilisation rate in the intermediate goods industry decreased from 77% to 76.9%, while the usage in the capital goods manufacturing rose from 76.4% to 76.9% in October.