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Turkey Business Confidence May 2018

Turkey: Business confidence slips in May on weaker expectations

The Real Sector Confidence Index published by the Central Bank inched down to 109.9 from 111.2 in April, marking the second consecutive monthly decline. The decline came during a month which saw significant volatility in the FX markets and rising concerns over economic overheating. Nonetheless, the index remained above the 100-point threshold that separates optimism from pessimism among firms, where it has been for over a year.

The deterioration came on the back of falling confidence across the majority of the components of the index. Firms grew less optimistic regarding output, employment and export orders over the next three months, and became gloomier regarding the general business situation. In contrast, they grew less pessimistic regarding current orders.

In terms of prices, the differential between firms that expected higher input prices over the next three months and those that expected lower input prices narrowed in May. Similarly, on balance less firms saw higher selling prices over the next three months. However, firms still overwhelming expected higher prices, which is understandable given that inflation is currently in double digits.

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