Mixed signals over Turkey’s economic morale after coup attempt

Mixed signals over Turkey’s economic morale after coup attempt

Mixed signals over Turkey’s economic morale after coup attempt Turkey’s economic morale has given some mixed signals in the uncertain aftermath of July’s attempted military coup, with the economic confidence index dropping by 24.1 percent in August compared to the previous month but the consumer confidence index rising.

This fall in the economic confidence index - from 95.73 to 72.66, the steepest decline so far this year - stemmed from drops in the confidence indices of the services, construction, real sector and retail sectors, data from the Turkish Statistics Institute (TÜİK) showed on Aug. 29. 

The economic confidence index indicates an optimistic outlook about the general economic situation when the index is above 100, and a pessimistic outlook when it is below 100.

In August the services confidence index decreased to 91.06, the construction confidence index decreased to 79.43, the real sector confidence index decreased to 103, and the retail trade confidence index decreased to 101.19.

Turkey’s economic confidence index in July had risen by 14.9 percent compared to the previous month, up to 95.73.

The consumer confidence, meanwhile, rose by 11.1 percent in August from the previous month.

The index was 74.44 in August, up from 67.03 in July, according to official data. 

The index hit a six-year low of 58.52 last September, but has since recovered somewhat, even after the failed coup attempt. Turkey’s economy has grown mainly on the back of robust consumption over the past couple of years.

Consumers optimistic about economic situation

Households turned optimistic about the general economic situation for the next 12 months, with the general economic situation expectation index increasing from 89.82 in July to 101.95 in August, according to the results of the TÜİK survey, made in cooperation with the Central Bank. 

The household financial situation expectation index also increased by 6.6 percent compared to the previous month, up to 94.19 in August.

More consumers also expect a decline in unemployment rates, while they seemed to be less pessimistic about their saving prospects.

Analysts noted that the September data need to be awaited in order to see clearer effects of the failed coup attempt on economic and consumer morale. 

The latest consumer confidence figures are the highest since November 2015, which followed the parliamentary election, when the index rose to its highest level since April 2014.

Turkey’s economy grew a larger-than-expected 4.8 percent in the first quarter of 2016, official data showed in June, outperforming major emerging markets peers. Analysts suggested that wage hikes and spending by Syrian migrants fueled private consumption in the first quarter of the year. 

Domestic demand contributed 6 percent of growth, official data showed, but net external demand reduced the overall growth figure by 1.5 percent.