Turkey: Business confidence continues to weaken in July
The Real Sector Confidence Index published by the Central Bank fell from 104.6 in June to 102.7 in July, marking the fourth consecutive monthly decline. The drop came during a month which saw ongoing uncertainty regarding the future direction of fiscal policy, higher inflation and instability in the FX market. The index is now only slightly above the 100-point threshold that separates optimism from pessimism among firms.
The deterioration came on the back of falling confidence regarding total current orders, the general business situation, and employment. In contrast, firms grew more upbeat regarding output over the next three months.
In terms of prices, firms’ inflation expectations for the next 12 months surged once again in July, likely driven by the recent lira depreciation and the news that inflation reached a multi-year high in June. Inflation expectations have now risen almost uninterruptedly since the start of 2018, and present a major challenge for the Central Bank, which is looking to drive inflation down towards the 5% target.