Research Notes

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.