Turkey: Businesses grow more optimistic in April
Turkish businesses became more optimistic at the outset of the second quarter, with the Real Sector Confidence Index rising to 105.5 in April from 102.1 in March. April’s result marked the highest print since June last year and the index consequently moved further north of the neutral 100-point mark that separates optimism from pessimism.
The improvement in the headline figure was driven by greater output expectations in the next three months, which in part reflects an improvement in orders in the past three months and greater expectations for export orders in the three months ahead. Meanwhile, current amounts of orders and stocks rose in April from the prior month, but remained depressed nonetheless. Firms also expect job creation to remain robust in the three months ahead.
Firms’ high inflation expectations for the next 12 months in April, meanwhile, remained virtually unchanged from the prior month, inching down to 22.5% from 22.6% in March. This is likely linked to currency weakness, as the lira came under renewed pressures in the lead up to local elections on 31 March. Inflation expectations affect price-setting behavior, so actual inflation is unlikely to return to more manageable levels soon. On the other hand, the high base effect and collapsing domestic demand should drive inflation down somewhat.