Turkey's consumer confidence index improved by 2.1% m/m to reach 72.8 in May, the highest level recorded since October last year, data from national statistics office TUIK showed on May 18.
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 seem surprisingly willing to spend despite a strong set of regional and domestic security threats. The consumer confidence index has shown an improvement in each of the three months since February.
The TUIK survey for May underscored consumers’ optimistic views on the general economic situation, households’ financial situation and the job market for the next 12 months despite the economic and political challenges Turkey is facing.
The latest survey showed that Turkish consumers expect the unemployment rate, which stood at 12.6% as of February, to decline as they believe the general economic outlook will brighten over the next 12 months.
The Turkish lira was trading at 3.5828 per dollar, up 0.36% d/d, as of 10:15 on May 18 while the benchmark BIST-100 index was down 0.30% d/d to 95,441.
Even while expressing optimistic views about the economic outlook, consumers said they were 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 1.7% m/m and 0.5% m/m, respectively.
The probability of buying durable goods increased 1.6% m/m in May thanks to 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 week. 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 six consecutive months between October last year and March 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.
|TUIK's Consumer Confidence Sub-Indices|
|Consumer Confidence Index||75.0||67.7||73.6||63.4||66.9||65.7||67.8||71.3||72.8|
|Financial Situation Expectation of Household||92.4||88.8||93.2||85.4||87.9||85.9||87.8||90.7||92.0|
|General Economic Situation Expectation||101.9||91.8||99.9||86.0||88.6||88.0||93.2||96.2||100.6|
|Number of People Unemployed Expectation||81.8||67.3||78.4||65.4||68.9||67.9||70.4||73.1||75.3|
|Probability of Saving||23.8||23.0||22.8||16.7||22.4||21.0||19.9||25.1||23.3|