Macro and Politics

*Istanbul Chamber of Industry (ICI) Turkey September Manufacturing PMI will be announced @ 10:00 local time. The Istanbul Chamber of Industry (ICI) Turkey Manufacturing PMI rose to 47.3 in August from 45.9 in July, marking its first increase since January and reaching its highest level since April. Yet, the index continues to remain below the 50-threshold since April 2024, signaling a continued contraction in manufacturing activity. Although the leading indicators for 3Q25 remain limited, indicators so far suggest a modest slowdown on an annualized basis relative to the previous quarter. The sharp acceleration in industrial sector activity observed in 2Q25 (+6.1%) was largely driven by a low-base effect and changes in calculation system. Accordingly, we expect this effect to moderate in 3Q25, thereby revealing a more pronounced weakness in the industrial sector trend. While our full-year growth forecast for 2025 remains at 3.1%, the stronger-than-expected 2Q25 growth and subsequent data revisions suggest intensifying upside risks to our forecast. 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.

* The adjusted unemployment rate climbed from 8.1% to 8.5% in August. As per the composite measure of labor underutilization – including time related underemployment, potential labor force and unemployment – increased marginally from 29.6% to 29.7%. Moreover, within the components, the combined rate of time-related underemployment and unemployment edged up merely from 19.1% to 19.3%, while the combined rate of unemployment and potential labor supply rose from 19.9% to 20.2%. The persistently elevated level of labor underutilization points to a weaker labor market than headline data suggest. Sustained high levels of time-related underemployment and potential labor supply indicate that overall labor underutilization is likely to remain elevated in the coming period.

* According to foreign trade figures released by TURKSTAT, exports decreased by 1.2% y/y in August to USD21.7bn, while imports dropped by 3.9% y/y to USD25.9bn. As a result, the foreign trade deficit narrowed from USD6.5bn to USD4.2bn as of August, whereas the 12-month cumulative deficit eased from USD88.3bn to USD87.5bn. Based on the August foreign trade figures, we expect the current account balance to post a surplus of USD5.68bn in August. We maintain our year-end current account deficit forecast at USD22bn, corresponding to 1.5% of GDP, with downside risks attached.

*The Treasury released its three-month (October – December 25’) domestic borrowing strategy as it has a domestic redemption of TL263.6bn in October, while in return plans to borrow TL290.1bn throughout the month via five auctions and one direct sale.