Turkey’s business confidence index slumps to lowest level since 2009

Turkey’s business confidence index slumps to lowest level since 2009
By Akin Nazli in Belgrade September 24, 2018

Turkey’s business sentiment index declined for a sixth consecutive month in September, with a 6.8-point month on month drop taking it to 89.6, a level that is the lowest recorded since April 2009, central bank data showed on September 24.

The data comes with analysts widely expecting Turkey, struggling with its currency crisis, to move into recession in the remaining months of this year. Standard & Poor’s has predicted that the depth of the potential recession could shrink the country’s GDP from around to $850bn to $594bn, the lowest level recorded since 2006. Turkey’s dreams of becoming a trillion-dollar economy are quickly receding.

The 100-point level on the index separates optimism from pessimism. Turkish business confidence stayed in optimistic territory for 18 uninterrupted months from February 2017 through to July this year. The 2018 peak of 111.9 came in March.

The index decline in September equates to 7% m/m from the 96.4 reading in August, meaning it is the sharpest monthly decline seen since October 2011.

Seven of the business sentiment survey’s eight main sub-indices deteriorated in September month on month. The sharpest monthly decline, of 19% m/m, was once more seen in participants’ assesments of the general business situation. In the previous month, that sub-index fell 17% m/m. The only positive development was recorded in the sub-index measuring current stocks, pointing to a decline in stocks.

A local chamber of commerce in Turkey on September 12 told of reports that some of its members are unable to pay their power bills amid the country’s ongoing economic turmoil.

Meanwhile, the seasonally-adjusted business confidence index declined by 6% m/m to 90.4.

The adjusted index saw 110.9 points in January before posting declines for the parameter were recorded for next eight months.

The central bank also reported on September 24 that the capacity utilisation rate (CUR) of Turkey's manufacturing industry fell from 77.8% in August to 76.2% in September, the lowest level in evidence since March 2016.

The day also saw statistics institute TUIK announce that seasonally adjusted business sentiment in construction, retail and services continued to deteriorate sharply in September.

The seasonally-adjusted services confidence index decreased by 9.7% m/m to 79.4 following a 4.2% m/m decline in August while the retail confidence index declined by 5.2% m/m to 88.5 following a 4% m/m fall in the previous month.

The construction confidence index decreased by a sharper 16.7% m/m to 66.4 in September following a 10.7% decline a month ago.

TUIK said also on September 24 in a separate release that annual growth in the construction cost index reached 27.01% in July. The index rose 16.18% in December and showed an escalating pace across the first seven months of 2018.

Homes sales in Turkey declined by 13% y/y to 105,154 units in August following the growth of 7% y/y registered in JulyTUIK reported on September 17.

Turkey's calendar-adjusted retail sales volume index rose by 3.1% y/y in July, marking the lowest annual growth recorded since February 2017, TUIK reported on September 17.

Turkey’s calendar-adjusted industrial production index moved up 5.6% y/y in July, following the revised 2.8% annual growth registered in Junedata from TUIK showed on September 17.