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Macro and Politics

Tacirler Investment

* Istanbul Chamber of Industry (ICI) November PMI figures will be announced @ 10:00 local time. Istanbul Chamber of Industry (ICI) October PMI increased to 45.8 level from 44.3 level, yet standing below the 50-threshold for the seventh consecutive months. The accompanying note underlined that Turkish manufacturer continued to face a challenging environment as the final quarter of the year got underway, although rates of moderation in output, new orders, purchasing activity and employment softened since September. It is cited that market conditions remained challenging, leading to muted demand and further slowdowns in total new orders and exports. In turn, manufacturers scaled back production for the seventh month running. In all cases, however, rates of moderation softened from September. Following the leading indicators that showed further contraction in economic activity for the third quarter of the year, we observe that the indicators portrayed a slight improvement in October. However, given the tight financial conditions and anticipated further slowdown in domestic demand due to the lagged impacts of monetary policy, we expect industrial sector activity to remain weak in the coming period.

* In 3Q24, the Turkish economy contracted by 0.2% in sequential terms, while it grew 2.1% y/y, marking the lowest annual growth since the pandemic period. The 2Q24 growth figures were also revised down: quarterly growth was adjusted to -0.2% from 0.1%, and annual growth was revised to 2.4% from 2.5%. This marks the second consecutive quarter of contraction, signaling a technical recession. The quarterly contraction was mainly driven by a slight decrease in household consumption (-0.3% q/q), a decline in government spending (-0.4% q/q), and negative contributions from inventories. However, net exports continued to support growth, primarily due to a drop in imports (-1.6% q/q). While the quarterly result met market expectations, the annual growth remained below the median forecast of 2.4%. Our expectations were for a slightly higher quarterly contraction of around 0.5%, with annual growth at 1.5%. The ongoing tight monetary policy is impacting the Turkish economy, which has now contracted for two consecutive quarters, albeit modestly. Yet, we believe there hasn't been enough of a slowdown to support the disinflation process, as services and private consumption remain somewhat stronger than expected. Although data is still limited, the outlook for 4Q appears slightly more optimistic compared to 3Q. We expect GDP growth to finish 2024 at around 2.9%.

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