Macro and Politics

*The CBT will release the October Real Sector Confidence Index and Capacity Utilization Rate @ 10:00 local time today. The unadjusted Real Sector Confidence Index (RSCI) decreased from 100.6 level to in September, while the seasonally adjusted index increased from 100.6 to 100.8. Accordingly, the unadjusted RSCI, which averaged 101.6 in the second quarter of the year, retreated to 100.3 in the third quarter. 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) edged up from 73.5% to 74% in September, while the seasonally adjusted CUR rose from 73.6% to 73.8%. Following the robust growth performance recorded in the second quarter, leading indicators now point to a slowdown in economic activity during the third quarter. The sharp 6.1% increase in industrial output in Q2 was largely driven by base effects. As this impact fades in the third quarter, we expect the underlying weakness in the industrial sector to become more evident. Reflecting the stronger-than-expected Q1 growth figures and the major revisions introduced by TURKSTAT to the National Accounts System, we have revised our 2025 year-end GDP growth forecast upward from 3.1% to 3.4%.

* September Employment figures will be released @ 10:00 local time. 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.