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Macro and Politics

Tacirler Investment

* TURKSTAT will release November inflation figures today @10:00 local time. We expect the CPI to increase by 1.9% m/m in November, which would bring the annual CPI down to 46.6% from 48.6%. According to the survey conducted by Foreks, the median estimate for November CPI is 2% m/m, slightly in line with our house estimate. We expect the annual CPI to ease further around 45% by the year-end and thereafter follow a volatile, yet predominantly downward trend in the coming year as we project an annual inflation rate of 26% by the end of 2025. If the monthly inflation comes around 2% in November, as expected, we believe this would pave the way for the Monetary Policy Committee (MPC) to start cutting rates in December. Moreover, recall that the recent 3Q24 GDP data released on Friday showed the economy is in a technical recession, which the MPC is likely to view as a further signal to begin its easing cycle.

* Istanbul Chamber of Industry (ICI) November PMI increased to 48.3 level from 45.8, while standing below the 50-threshold for the eighth consecutive month. The accompanying note highlighted that although business conditions in the Turkish manufacturing sector remained challenging in November, there were signs of improvement in demand throughout the month. It was also noted that both output and new orders moderated to lesser extents, while employment returned to growth. According to the note, firms benefited from a further easing of inflationary pressures, with output prices rising at the slowest pace since December 2019. After averaging 49.8 in Q1 2024 and 48.5 in Q2 2024, the manufacturing PMI dropped to an average level of 46.4 in Q3 2024. In the first two months of the final quarter, PMI averaged around 47, indicating a modest improvement in activity, but still signaling an overall deterioration in the manufacturing sector. Thus, the data received so far for the final quarter point to a slightly more optimistic outlook for activity compared to the third quarter. However, when looking at the main trend in the manufacturing sector, we see that industrial activity is generally losing momentum, and we expect this weakening to remain effective for the coming period. We estimate that GDP growth in 2024 will be around 2.9%.

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