Macro and Politics

* The Real Sector Confidence Index (RSCI) increased from 100.2 in August to 100.6, while the seasonally adjusted index climbed from 98.9 to 100.6. It is worth recalling that readings below the threshold of 100 in the RSCI reflect a waning sentiment among real sector representatives regarding economic activities. Meanwhile, the Capacity Utilization Rate (CUR) slipped from 74.2% to 73.5% in August, while the seasonally adjusted CUR dropped from 74.1% to 73.6%. Following the robust economic growth recorded in the second quarter, leading indicators point to a deceleration in economic activity in the third quarter. The sharp rise in industrial output in 2Q25 (+6.1%) was largely driven by a favorable base effect. Beyond this, the improvement in industrial activity was not broad-based, with underlying weakness persisting across core segments except for selective areas such as defense and high-tech industries. As the base effect fades in 3Q25, we expect the underlying softness in the industrial sector to become more pronounced. While our full-year growth forecast for 2025 remains at 3.1%, the stronger-than-expected 2Q25 growth and subsequent data revisions suggest rising upside risks to our baseline. We are in the process of recalibrating our growth model following TURKSTAT’s comprehensive revisions to the National Accounts System. At this stage, we expect year-end 2025 growth to materialize in the 3.3%–3.5% range.