Macro and Politics

* TURKSTAT will release the May inflation figures today @ 10:00 local time. We forecast a monthly CPI increase of 2.1% for May, in line with the market consensus, which would bring the annual inflation rate to 36.2% from the previous month’s 37.9%. We continue to project year-end inflation at 31%.

* Istanbul Chamber of Industry (ICI) Turkey Manufacturing PMI declined from 47.3 to 47.2 in May, marking the lowest reading so far this year and the weakest since October 2024. Remaining below the 50-threshold since March 2024, the index continues to signal a sustained loss of momentum in manufacturing activity for over a year. The accompanying note underlined that business conditions moderated again in the Turkish manufacturing sector during May as muted demand conditions contributed to firms scaling back their production, employment and purchasing activity. The note highlighted that input costs continued to rise sharply, often as a result of currency weakness and output prices were also up, but a softening demand environment limited the pace of charge inflation. The note stated that employment and purchasing activity were also scaled back to larger extents than in April, while manufacturers reduced their inventories of both purchases and finished goods.