Turkish consumer confidence index recovers 1.9% m/m in July

Turkish consumer confidence index recovers 1.9% m/m in July
By bne IntelliNews July 21, 2017

Turkey's consumer confidence index recovered by 1.9% m/m to 71.3 in July from 70 in June, achieving the lowest figure recorded since March’s 67.8data from national statistics office TUIK showed on July 20.

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 trough of 65.7 to May’s peak of 72.8.

The TUIK survey for July underscored consumers’ more optimistic views on households’ financial situation, the job market for the next 12 months and the probability of saving. Meanwhile, the sub-index measuring the general economic situation fell further by 1.6% m/m after declining 3.3% m/m in June.

The latest survey showed that the sub-index measuring consumers’ expectations regarding the number of unemployed people recovered by 5.2% m/m, following a sharp deterioration of 6.1% m/m in June. The rise in the sub-index shows that consumers expect unemployment conditions to improve in the next 12 months.

Turkey's unemployment rate declined for the third consecutive month to 10.5% in April, the lowest level posted since June 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%.

Consumers also said in July that they were much more 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 jumped by 21% m/m and 43% m/m, respectively.

The probability of buying durable goods now also rose by 5% m/m in July.

Domestic white goods sales rose by 27% y/y to 4.43mn units in H1, data from the White Goods Manufacturers’ Association of Turkey (Turkbesd) showed also on July 20. White goods prodcution rose by 9% y/y to 13.99mn units in the first half as exports rose by 2% y/y to 9.37mn.

Home sales in Turkey grew 6% y/y to 556,784 units in January-May. Sales of passenger cars and light commercial vehicles (LCVs) across H1 declined 9% y/y to 401,158 units.

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 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 in May. 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.

Turkey's calendar-adjusted retail sales volume index rose by 1.2% y/y in May after posting annual declines for seven consecutive months from October to April. 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 last month. “The treasury has already jacked up its net borrowing ratio over 100%, while consumer and corporate leverage is increasing alarmingly,” noted Yesilada.

Data

Dismiss