Macro and Politics

* December Employment figures will be released @ 10:00 local time. The seasonally adjusted unemployment rate rose slightly from 8.5% to 8.6% in December. Meanwhile, the rate of composite measure of labor underutilization – consisting of time-related underemployment, potential labor force and unemployment – declined from 29.7% to 29.1%. Looking into the composition of the underutilization measure, the combined rate of time-related underemployment and unemployment fell from 20% to 18.7%, while the composite measure of unemployment and the potential labor force increased from 19.6% to 20.2%, pointing to a continued weakness in job-search dynamics. Despite the monthly decline in headline unemployment rate, the broad-based labor underutilization rate remains elevated at around 29%. Having exhibited notable stickiness around 30% since early 2025, this indicator suggests that labor market conditions remain weaker than implied by the headline unemployment rate.

* TURKSTAT will release January Economic Confidence Index @ 10:00 local time. The economic confidence index remained unchanged at 99.5 in December, maintaining its highest level since March 2024. While the index’s continued stay below the 100 threshold indicates that overall economic sentiment remains in pessimistic territory, the gradual rise from 96.3 in July to 99.5 suggests that the deterioration in sentiment has been losing momentum. A breakdown of the December data points to a divergence across sub-components. Consumer confidence declined by 1.8% m/m to 83.5, underscoring the persistence of a cautious stance among households. In contrast, real sector confidence edged up by 0.5% m/m to 103.7. Confidence in the services sector increased by 0.4% to 112.3, while retail trade confidence rose by 1.1% to 115.4. Meanwhile, construction sector confidence fell by 0.5%, declining to 84.5. Overall, the sub-component dynamics suggest that household sentiment remains subdued, whereas activity conditions in the services and retail sectors continue to exhibit relative resilience.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of January 16 – 23 @ 14:30 local time. Based on our calculations derived from the CBT’s analytical balance sheet, we estimate that during the week of January 16 – 23, the CBT’s gross FX reserves rose by USD10.3bn to USD215.5bn, reaching a new record high, while net international reserves increased by USD4.6bn to USD95.5bn. We expect the official figures to broadly validate this improvement. To recall the previous week’s data: During the January 9 – 16 period, foreign investor activity remained constructive, with net inflows of USD196.9mn into equities and USD1.1bn into the bond market (excluding repo transactions). As a result, the foreign share in the total domestic bond stock increased from 7.7% to 8.0%, reaching its highest level since March 2025. During the same period, the residents’ FX deposits retreated by USD1.1bn (excluding gold, EUR/USD parity effect adjusted), while their total FX deposits (including gold, price adjusted) increased by USD548mn during the week of January 9 – 16. In terms of the official reserves, the CBT’s gross FX reserves increased by USD9.1bn to USD205.2bn, net international reserves rose by USD8.1bn to USD90.9bn and net reserves excluding swaps climbed by USD8.7bn to USD78.6bn.