Turkey: Business confidence continues to slide in September
The Real Sector Confidence Index published by the Central Bank declined from 96.4 in August to 89.6 in September, marking the sixth consecutive monthly decline and the lowest reading in nearly a decade. The drop came following the collapse in the lira in August, which has put strain on corporates’ balance sheets and spurred price pressures. As a result, the index moved further below the 100-point threshold that separates optimism from pessimism among firms.
The deterioration came on the back of falling confidence regarding total current orders; orders over the past three months; and output and employment over the next three months. On the other hand, firms grew more optimistic regarding total export orders in the next three months, supported by the huge currency depreciation.
In terms of prices, firms’ inflation expectations for the next 12 months continued to soar, reaching 22.0%. Inflation expectations have now risen almost uninterruptedly since the start of 2018, and their impact on price-setting behavior presents a major challenge for the Central Bank in its efforts to rein in inflation.