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, data from national statistics office TUIK showed on June 22.

The government introduced a set of stimulus measures during the first quarter of the year in the build-up to the April 16 referendum on introducing an executive presidency. Turkish consumers subsequently seemed surprisingly willing to spend despite a strong set of regional and domestic security threats.

The consumer confidence index showed an improvement in each of the three months before June, rising from February’s bottom point of 65.7 to May’s peak point of 72.8.

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

The latest survey showed that the sub-index measuring consumers’ expectations regarding the number of unemployed people deteriorated by a sharp 6.1% m/m in June, following a 3% m/m improvement a month ago. The decline in the sub-index shows that consumers expect unemployment conditions to deteriorate.

Turkey's unemployment rate declined further to 11.7% in March, the lowest level posted since last October, thanks to the government’s campaign forcing the private sector to fuel new employment before the referendum, according to the latest data from TUIK. Despite the slight recovery seen over February and March, the March 2017 figure was nevertheless far higher than the 10.1% recorded for March 2016.

The IMF projects that the Turkish unemployment rate will pick up to 11.5% in 2017 while it expects GDP growth of 2.5%.

The sub-index measuring consumer sentiment regarding the general economic situation deteriorated by 3.3% m/m in June following a 4.5% m/m improvement in May.

Consumers also said in June that they were much less likely to spend their money on big ticket items such as vehicles and houses. The sub-indices measuring the probabilities of buying a car and a house over the next 12 months declined by 22% m/m and 34% m/m, respectively.

The probability of buying durable goods also declined by 0.5% m/m in June despite the expansion of VAT cuts.

The government is trying to stimulate the housing market by urging lenders to cut mortgage rates amid an environment of rising inflation and implicit policy rate hikes. Turkish automakers are, meanwhile, demanding similar tax cuts to those the government has awarded to producers of durable household goods. However, deteriorating fiscal metrics are currently deterring the government from granting more such tax reductions.

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.

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

The Turkish retail sales figures showed year on year contractions for seven consecutive months between October last year and April this year, according to the latest calendar-adjusted retail index data put out by TUIK. Annual retail sales growth slowed to 0.7% in 2016 from 3.6% in 2015.

The current growth boom, mostly driven by government spending and consumer expenditure, is not sustainable, Atilla Yesilada, an adviser at GlobalSource Partners, told bne Intellinews earlier this month. “The treasury has already jacked up its net borrowing ratio over 100%, while consumer and corporate leverage is increasing alarmingly,” noted Yesilada.