Research Notes

Consumer prices rose by 3.0% m/m, in line with our expectations but slightly lower than the consensus (3.2%), resulting in an annual inflation of 37.9%. We calculate only a limited worsening in seasonally adjusted monthly inflation to 2.7%, mainly helped by a correction in food prices.

The data realizations for 1Q25 GDP growth point that a similar quarterly growth to 4Q24 is likely to have been preserved with the support from domestic demand, while production indicators maintained a weaker outlook led by the industrial activity.

The Central Bank of the Republic of Türkiye (CBRT) hiked the policy rate (one-week repo) by 350bps to 46%, surprising the market expectations of a no change.

Consumer inflation rose by 2.46% m/m, lower than both our expectation (3%) and the market consensus (2.9%), bringing annual inflation down to 38.1%. The deviation from our forecast mainly stems from core inflation, particularly in the services inflation. Seasonally adjusted monthly inflation increased on food and basic goods inflation, whereas a broad-based correction in services (excluding other services) and weakness in energy prices were supportive factors.

Consumer prices rose by 2.27% m/m in February, lower than both consensus (3%) and our expectation (2.9%), leading to a further decline in annual inflation (39.05%) on favorable base effects and improving trend. We calculate the seasonal adjusted monthly inflation as 2.3% (down from 3.2% in January), which leads the three-month-average trend to decelerate to 2.5% in February (vs. 2.6% prev.).

Consumer prices rose by 5.03% m/m in January, higher than consensus and our expectation (both at 4.3%), still leading its annual inflation to decline further to 42.12% on favorable base effects. Reinforced by the upward surprise in core prices, underlying monthly inflation trend as an average of six indexes followed by the CBRT, deteriorated to 2.4% (vs. 2.2% in Dec), according to our calculations.

The Central Bank of the Republic of Türkiye (CBRT) lowered the policy rate by 250 basis points in its March meeting, bringing it down to 42.5% in line with expectations. The CBRT justified the decision based on the decline in the underlying inflation trend after January and still supportive level of domestic demand on disinflation despite its stronger than expected pace as of 4Q24.

The Central Bank (CBRT) lowered the policy rate by another cut of 250 bps to 45%, in line with the market expectation and ours. The bank rationalized rate cut by referring to the fact that inflation in January was in line with its expectations after the recovery trend in December and domestic demand remained at disinflationary levels in 4Q24, pointing negative output gap.

Headline inflation eased to 1.03% m/m (vs. 2.24% prev.), lower than consensus and our expectation (both at 1.6%), leading year-end inflation to materialize at 44.4%. While the headline inflation was supported by food and core prices, seasonally adjusted data indicate that the correction primarily stemmed from fresh fruit and vegetable prices.

Incoming data signals that 4Q24 GDP growth could have been higher than our previous stagnant quarterly growth expectation.

The Central Bank (CBRT) lowered the policy rate by 250bps to 47.5%, beating the market expectations of 150- 200bps cut (vs. our 100bps cut call), but with a narrowed down symmetric interest rate corridor of 150bps from 300bps. In the monetary policy framework of 2025, the CBRT reduced the number of meetings in 2025 to 8 from 12 and already signaled that they can start easing with a bolder move since they now gain room to have a scheduled wait & see time.

Headline inflation eased to 1.03% m/m (vs. 2.24% prev.), lower than consensus and our expectation (both at 1.6%), leading year-end inflation to materialize at 44.4%. While the headline inflation was supported by food and core prices, seasonally adjusted data indicate that the correction primarily stemmed from fresh fruit and vegetable prices.

The Turkish economy entered a mild recession as of 3Q24 after contracting 0.2% q/q for two consecutive quarters.

The Central Bank (CBRT) kept the policy rate at 50% in line with the expectations, yet with important changes in their communication, signaling an easing cycle potentially as early as December MPC meeting. First, their assessment on the inflation outlook turned out to be more positive.

Consumer prices increased by 2.88% in October, higher than our expectation (2.7%) and consensus (2.5%). Annual consumer inflation declined to 48.58% (vs. 49.38% prev.) on the back of favorable base effects.

Tight financial conditions continue to put downside pressure on the production side but the leading indicators on the demand side signal a bottoming out in 4Q, led by private consumption, following a weakening in 3Q. Despite the fact that the output gap approached zero in 3Q, aggregate demand remains stronger than supply.

The Central Bank (CBRT) kept the policy rate at 50% in line with the expectations. Despite the negative surprise of the September consumer inflation, the bank seems to preserve a tone similar to the September MPC decision, where they had started to soften their communication about the risk factors on inflation.

Consumer prices rose by %2.97 m/m in September, higher than our expectation (2.5%) and consensus (2.2%). Annual consumer inflation came down below 50% (49.37% vs. 51.97% prev.) on the back of base effects and steadily depreciating currency.

The moderation in demand continues while the production side demonstrates a clearer worsening trend. The tightening in financial conditions has a higher impact asymmetrically on the production side, yet been unable to
restrain the private consumption to a considerable extent.

Consumer prices rose by %2.47 m/m in August, higher than our expectation (2.2%) and consensus (2.3%). As a result, annual consumer inflation came down to 51.97% from 61.78% previously. According to our calculations, underlying consumer inflation trend slightly eased to 2.8% from the previous 3%, supported by the decline in food prices; while core prices trend worsened led by services inflation reflecting backward indexation and second round effects.

The Central Bank (CBRT) kept the policy rate at 50% in line with the expectations. The bank eased its tone by changing the statement that monetary policy will be tightened when necessary to that monetary policy tools will be used effectively.

Production continued to weaken, driven by tight financial conditions therefore an ongoing contraction in commercial loans in real terms, and further moderation in aggregate demand. Hard data and leading indicators point to a broad-based weakness in sectorial output in 3Q with a potentially deeper impact on services compared to 2Q composition. Our monthly GDP indicator nowcasts a quarterly contraction in August (-0.4%) and an increase (0.1% q/q) as of September, implying 3.4% y/y GDP growth but we do have less information for September (Figure 1-2). Hence, there could be likely a mild quarterly contraction in 3Q, in line with our expectation.

Turkish economy grew by 0.1% q/q and 2.5% y/y in 2Q24. Significant revisions in both 2023 and 1Q24 resulted in a moderation of the quarterly growth path with 0.1% growth in 2Q24 after 1.4% in 1Q24 (vs. 2.4% before revision) in contrast with our previous expectation of a mild contraction.

Following the hard data realizations of June, we now assess that the bridge day effects (additional holiday days due to extended religious holidays) do matter much higher than we had previously expected on economic activity. Consequently, our monthly GDP indicators nowcast a quarterly contraction of 0.8% in 2Q which slightly improves to -0.6% in 3Q as of early August. Yet, if we exclude bridge day effects in a counterfactual analysis to understand the underlying trend, the quarterly contraction would be more modest at around 0.4% and it does not change much so far in 3Q in the absence of any hard data. Overall, the lagged effects of the monetary tightening have started to be seen more clearly but its magnitude is still not clear, given the high uncertainty due to the bridge day effects and also the adjustment after the strong quarterly growth rate of 2.4% recorded in 1Q.

The Central Bank (CBRT) kept the policy rate at 50% in line with the expectations. They repeat their commitment to support monetary transmission mechanism via additional macro-prudential measures if needed. On inflation, they now assess domestic demand as slowing down and reducing its inflationary impact, which they previously evaluated as inflationary. They highlight the high level and stickiness of services inflation and emphasize that the alignment of inflation expectations and pricing behavior with projections has gained relative importance for the disinflation process.

Consumer prices rose by 3.23% m/m in July, lower than both our expectation (3.6%) and consensus (3.45%, according to Reuters), but annual inflation declined to 61.8% from 71.6% in June on strong base effect. The worsening in monthly inflation trend remained limited excluding the one-off impact stemming from electricity price hikes and automatic tax adjustment in fuel prices and tobacco and alcoholic beverages.

The Central Bank (CBRT) kept the policy rate at 50% in line with the expectations. They repeat their commitment to support monetary transmission mechanism via additional macro-prudential measures if needed. Given the most recent excess TL liquidity and the downside pressure on O/N TL rates, in a separate note sent to the banks, it is said that the CBRT might hold FC and gold swap auction to sterilize TL liquidity. Last Friday, the CBRT had also reduced the monthly credit growth cap to 1.5% (from 2%) in foreign currency lending.

Consumer prices rose by 1.64% m/m in June, much lower than both our expectation (2.24%) and consensus (2.20%), which led to an annual inflation of 71.60%. We observe a considerable slow-down in core prices inflation, mostly driven by basic goods inflation on top of some softening in domestic demand and a stable currency.

Economic activity decelerates further, especially led by the worsening in the industrial production; whereas services sector prevents a further deterioration. Our monthly GDP indicators confirm the ongoing slow-down and we nowcast a mild quarterly contraction of 0.3% in 2Q24 which implies an annual GDP growth rate closer to 4%.

The Central Bank (CBRT) kept the policy rate at 50% in line with expectations without also adding new liquidity or credit measures. The CBRT maintains its cautious stance on inflation, given the risks from the inertia particularly in service inflation, high food prices, geopolitical risks and still inflationary but lately softening demand pressures. 

After the strong growth performance (2.4% q/q) in 1Q24, our monthly GDP indicator nowcasts 0-0.5% quarterly growth in 2Q24, implying closer to 4% y/y GDP growth as of early June.

Consumer prices rose by 3.37% m/m in May, higher than our expectations (3.0%) and consensus (3.1%), which led the annual inflation to rise to 75.45%. The easing in core prices trend was very limited due to stickiness in services prices and basic goods prices on top of the continuation of solid demand, second round effects, high inflation expectations and strong inertia.

The Turkish economy grew by 5.7% y/y in 1Q24 (5.5% market consensus and 6% our expectation). The quarterly acceleration in economic activity was faster than our expectation with 2.4% q/q, driven by mainly still robust aggregate demand.

After the surprising rate hike in March, the Central Bank (CBRT) wants to observe the lagged effects of the tightening on demand conditions and inflation expectations, and consequently on the inflation trend. Yet, stronger balance sheets from the previous financial repression period, wealth effects and continuing availability of card spending still support domestic demand, weakening the monetary transmission mechanism.

Our monthly GDP indicator nowcasts an acceleration in 1Q24 with a quarterly growth of 1.5% (vs. 1% q/q of 4Q23) implying 6-6.5% y/y GDP growth, driven by supportive fiscal policy and solid domestic demand. Given the early 2Q data, we nowcast only a limited deceleration in May. (Figure 1-2). According to our calculations, persistently high positive output gap indicates that the expected rebalancing in the economy still did not materialize.

Consumer prices rose by 3.18% in April, parallel to our expectation of 3.1% and slightly lower than the market consensus of 3.4%, which led to an annual consumer inflation of 69.8%. Core inflation trend has eased thanks to basic goods inflation, whereas high services inflation pointed out a strong inertia.

The Central Bank (CBRT) kept the policy rate on hold, in line with ours and market expectations. They stated the inertia in high service prices, inflation expectations, food prices and geopolitical risks keep the pressures on the inflation alive. The CBRT rationalized the decision by emphasizing the recent significant tightening in financial conditions and the lagged impact of the monetary policy.

Consumer prices rose by 3.16% in March, both lower than our expectation and consensus (3.5% and 3.6%, respectively), while annual inflation accelerated to 68.5% from 67.07% the month before. The main deviation in our forecast was due to the slower than expected food inflation.

The Central Bank (CBRT) surprised the markets and hiked the policy rate by 500 bps to 50%. They also widened the interest rate corridor and set the overnight borrowing and lending rates 300 bps below and above the policy rate, respectively.

After the strong growth performance in 2023 with 4.5% y/y, our monthly GDP indicator nowcasts an acceleration in activity with annual growth of 5.5% in March, driven by fiscal impulse and still solid private consumption...

Consumer prices rose by 4.53% in February, higher than our expectation and consensus (4.0% both), while annual consumer inflation accelerated to 67.07% from 64.86% the month before. The main deviation in our forecast was due to core inflation, led by services prices.

Turkish economy grew by 4.0% y/y in 4Q23 above both our expectation and market consensus (3.6%), leading to an overall GDP growth of 4.5% in 2023. Seasonal and calendar adjusted GDP growth accelerated to 1.0% from 0.3% in 3Q23; yet its composition was unevenly distributed since construction value-added was the main contributor while the industrial output contracted. 

The Central Bank (CBRT) maintained the policy rate at 45% as expected. Compared to the previous messages, the CBRT now seems more concerned about the inflation outlook since they observe lower than projected consumption expenditures in some items and signal potential pressure from inflation expectations and pricing behavior due to wage increases.

Following the monetary tightening process, loan growth has moderated towards the end of 2023. This has been followed by some limited acceleration in the first weeks of 2024. Private banks grow mostly in TL lending, whereas public banks support their profitability from FC lending.

In the first inflation report of the year, the Central Bank (CBRT) maintained their interim inflation targets (36% by end 2024 and 14% by end 2025). Even though the recent minimum wage hike was above their previous assumption, the expected improvement in the underlying inflation trend was the main reason not to revise the current targets.

Our GDP nowcast indicators signal a continuing deterioration in economic activity with around stagnant quarterly GDP growth rate, which corresponds to an annual growth rate of 3.6% in 4Q23 and 3.5% as of January.

Consumer prices rose by 6.70% in January, higher than our expectation (5.7%) but parallel to the consensus (6.6%) and annual consumer inflation accelerated slightly to 64.86% from 64.77% the month before. Our main deviation stemmed from higher than expected realization in core prices led by the services across-the-board.

Industrial production (IP) fell by 1.4% m/m in seasonal and calendar adjusted series in Nov23, while increasing slightly by 0.2% y/y on calendar adjusted terms. Quarterly IP trend confirmed the weakening in activity by showing 1.3% contraction in Oct-Nov23 compared to 3Q23 (vs. 0.1% q/q in 3Q23), triggered by mainly non-durable consumer goods production.

Consumer prices rose by 2.93% in December close to our expectation (3.3%) and market consensus (3.0%) and its annual inflation accelerated to 64.77% from 61.98% the month before, beating the Central Bank’s revised interim target of 65%. The main deviation in our forecast was due to core inflation being slightly weaker than expected.

Consumer prices rose by 3.28% m/m in November, lower than both our expectation (4.0%) and market consensus (3.7%), while its annual inflation accelerated slightly to 61.98% from 61.36% the month before. The main deviation in our forecast was mainly due to core inflation being much weaker than expected, while food inflation was in line with our expectation.

Turkish economy grew by 5.9% y/y in 3Q, above the market consensus of 5.3% but parallel to our expectation of 6%. Seasonal and calendar adjusted GDP lost momentum (0.3% q/q) after its strong acceleration in 2Q (3.3% q/q). Despite some slowdown, domestic demand remained stronger than production. Monetary policy tightening, selective credit policies and restrictions on consumer credit growth started to limit private consumption, while the composition of aggregate demand began to change in favor of investment and exports.

Consumer prices rose by 3.43% m/m in October, lower than both our expectation (4.5%) and market consensus (4.1%), which led to the annual inflation decelerating slightly to 61.36% from 61.53% previously. The downward surprise stemmed from weaker than expected realizations of both food and core inflation. Managed depreciation in the currency and strong but relatively weaker cost-push factors have started to feed into slower inflation in exchange rate sensitive goods prices, whereas services prices maintained pressure from ongoing inflation inertia and annual core C inflation accelerated to 69.8%.

Consumer prices rose by 9.09% m/m in August, higher than both our expectation (7.0%) and market consensus (7.2%), resulting in an annual inflation of  58.9% up from 47.8% in July. The lagged impact of currency depreciation with stronger exchange rate pass thru and higher than expected second round price effects especially on services prices led annual core inflation to upsurge to 65% from 56% the month before.

Turkish economy grew by 3.8% in 2Q23 in annual terms slightly above the market consensus of 3.5% (vs. our expectation of 4.5%), which corresponds to 5% GDP growth if the calendar day adjustment is made. The sequential quarterly growth showed a strong acceleration with 3.5% after its 0.1% contraction in 1Q23, confirming the solid recovery after the February earthquakes.

Consumer prices rose by 9.49% in July, slightly higher than our expectation (9%) and market consensus (8.6%). Annual consumer inflation accelerated significantly to 47.8% from 38.2% the month before, led by the exchange rate pass-thru triggered by the fast depreciation of the currency since late May and strong price adjustments on top of the recent tax hikes and wage increases.

Industrial production (IP) increased by 1.6% m/m in seasonal and calendar adjusted series, resulting in the 2.3% q/q acceleration of activity in 2Q (vs. 0.5% q/q in 1Q). The strong quarterly trend in turnover indices indicated that services, construction and trade sectors would remain supportive in 2Q.

Industrial production (IP) decreased by 0.2% year over year in calendar adjusted series while unadjusted one increased by 11.3% in May. Seasonal and calendar adjusted (sca) IP slightly recovered by 1.1% m/m, which led the cumulative growth to materialize as 1.4% during April-May compared to 1Q (vs. 0.5% q/q in 1Q). 

Consumer prices rose by 3.92% in June, lower than both our expectation (4.85%) and market consensus (4.3%). Annual inflation dropped to 38.2% from 39.6% in May on favorable base effects led by energy prices. Although the increase in food prices was in line with our expectation,

Consumer prices rose by 0.04% in May, slightly lower than both our expectations and market consensus (0.2% both). Therefore, annual inflation significantly came down to 39.6% from 43.7% the month before, driven by the Turkstat’s “zero price” method applied for natural gas prices in May

Turkish economy grew by 4% y/y in 1Q23 in line with market expectation (3.9%) but slightly lower than ours (4.3%). Seasonal and calendar adjusted GDP signaled loss of momentum due to the impact of the earthquakes since quarterly growth decelerated to 0.3% from 0.9%

Industrial production (IP) showed a rapid recovery in March increasing by 5.5% m/m (1.8% m/m consensus), mostly wiping out the impact from the earthquakes in February (-5.9% m/m). Consequently, quarterly IP growth decelerated to 0.4% in 1Q23 from 1.9% in 4Q22 but still signaled an improvement, backed by the continuation of strong consumption.

On February 6, Türkiye was hit by two earthquakes with a magnitude of 7.8 and 7.5 nine hours apart. Mainly 10 southeastern cities of the country was harshly affected with more than 38,000 people were dead and more than 108,000 people were wounded. In total, there were 13,5 million people live in the area.

Consumer prices rose by 2.37% in July, once again below market consensus (2.6%) and our expectation (4%), which led to an annual inflation of 79.6%. The downside surprise was due to lower than expected food prices, particularly unprocessed foodstuff, which is somewhat conflicting with other regional price indexes and observed data.

Turkish economy grew by 9.1% y/y in 4Q21, which resulted in a full year growth rate of 11% in 2021. Russia’s invasion of Ukraine and sanctions from the US, EU and other countries are clear additional downside risks on the growth outlook. We maintain our 2022 GDP growth forecast at 3.5% for now.

Consumer prices increased by 11.1% in January parallel to expectations and resulted in an annual inflation of 48.7% up from 36.1% the month before. We expect consumer inflation to remain around 55% in 2Q and 3Q before falling down to 35% at the end of the year, helped by the favorable base impact in December.

Industrial Production (IP) surprised on the upside, increasing 14.4% yoy in calendar adjusted terms (vs market expectation of 10.8%). IP also rose by 1.6% mom, resulting in a 4.3% quarter-on-quarter growth in 4Q21 (vs 2.0% qoq in 3Q21). Both retail sales and turnover index in the services sector suggest that consumption remains solid. Our Big Data demand proxies and other high frequency indicators also confirm a robust momentum despite recent energy supply shortages in late January. After forecasting a yearly growth rate of near 9% for December (implying 2.5% qoq growth in 4Q21), our monthly GDP indicator nowcasts a deceleration near 7% for February (33% of info).

Industrial Production (IP) increased by 11.4% yoy in calendar adj. terms (14.7% yoy in raw series) in November lower than the market expectation of 8%. Thus confirmed the continuation of strong economic activity given the acceleration in monthly growth of 3.3%, which was 0.7% in October.

Consumer prices increased by 2.39% in October surprisingly lower than expectations, resulting in an annual inflation of 19.89% up from 19.58% the month before. Considering global supply side restrictions, currency depreciation and cost push factors accompanied with still robust demand, risks remain clearly on the upside for inflation outlook.

Industrial Production (IP) grew higher than expectations by 13.8% yoy in calendar adjusted terms and 19.9% yoy in raw series in August. Monthly figure gave a correction by increasing 5.4% mom in August after the -3.4% mom contraction with the holiday effects in July. All sub-sectors gave positive contributions where capital goods production took the lead.

Consumer prices increased by 1.25% in September parallel to market expectations, resulting in an annual inflation of 19.58% up from 19.25% the month before. In contrast with expectations, core prices inflation surprised on the upside on the back of strengthening basic and durable goods prices which were weaker in the previous two months. Also, services prices continued to increase across-the-board.

Industrial Production (IP) grew remarkably lower than expectations by 8.7% yoy in calendar adjusted terms (vs. 15.2% consensus) in July, whereas it contracted by 2.3% yoy in raw series. The month-on-month figure also implied a large negative contraction of 4.2%, showing weaknesses across-the-board but especially in capital goods production.

Consumer prices increased by 1.12% mom and 19.25% yoy in August, again being realized above expectations on the back of a higher than expected food inflation.

Turkish economy grew by 21.7% in yearly terms in 2Q21, resulting in a growth rate of 14.3% in the first half of the year. Though, the quarter-on-quarter growth rate moderated to 0.9% after growing by 2.2% in 1Q21.