Macro and Politics

* The CBT will release the November Sectoral Inflation Expectations survey @ 10:00 local time. According to the results of the October Sectoral Inflation Expectations Survey, 12-month ahead inflation expectations diverged across sectors compared to the previous month. Expectations rose by 1.01pps to 23.26% among market participants and by 1.40pps to 54.39% among households, while declining by 0.50pps to 36.30% for the real sector. Following the stronger-than-expected September inflation print, inflation expectations of market participants and households deteriorated, whereas the real sector’s expectations recorded a modest decline. Overall, there are no clear signs of a lasting improvement in inflation perceptions across economic agents. TURKSTAT will release the November CPI data on December 3^rd at 10:00 local time. We expect the monthly CPI to increase by 1.2% in November. A realization in line with our projection would pull annual inflation down from 32.9% to 31.5% in November. For December, we anticipate a monthly reading slightly below 1%. Against this backdrop, we see a modest downside risk to our 2025YE CPI forecast of 31.5%. Our CPI forecast for 2026YE stands at 23%.

* The unadjusted Real Sector Confidence Index (RSCI) remained unchanged at 100.8 in November, while the seasonally adjusted index increased from 102 to 103.2, which stands for the highest level since March. Meanwhile, the Capacity Utilization Rate (CUR) rose from 74.2% to 74.4%, and the seasonally adjusted CUR inched up from 74% to 74.1%. An analysis of the subcomponents of November RSCI reveals that assessments regarding total orders over the past three months, export orders for the next three months, current total orders, expected production volume, and expected employment over the next three months exerted an upward impact on the headline index. In contrast, evaluations related to current inventories of finished goods, overall business conditions, and fixed investment expenditures weighed on the index. Regarding evaluations of the past three months, the improvement became more broad-based: the balance of responses shifted further in favor of firms reporting increases in production and export orders, while the decline reported in domestic orders in previous months reversed in favor of those indicating an increase. November data overall point to modest improvements in both confidence and capacity utilization. Moreover, the recovery in expectations for production, exports, and employment suggests that industrial activity is moving through the final quarter with a mild but sustained positive momentum. We assess that an annual growth rate of around 4.5% is achievable in the third quarter of this year. While our 2025YE growth forecast stands at 3.4%, we view the balance of risks around this projection as skewed to the upside.