Macro and Politics

* TURKSTAT will release June Consumer Confidence Index @ 10:00 local time. The consumer confidence index edged up from 85.5 to 85.8 in May, reaching its highest level since March 2025. Looking at the sub-components, the index measuring households’ current financial situation declined from 71.8 to 69.2, while the sub-index reflecting expectations for households’ financial situation over the next 12 months increased marginally from 87.5 to 87.9. The index tracking expectations for the general economic outlook over the next 12 months posted a more notable improvement, rising from 78.3 to 81.4. Meanwhile, the index measuring households’ willingness to spend on durable goods over the next 12 months – a key leading indicator for domestic demand conditions – recorded only a limited increase, edging up from 104.4 to 104.5. The breakdown of the sub-indices suggests that perceptions regarding current economic conditions continue to weaken, while recovering expectations for the broader economic outlook remain the main factor supporting consumer confidence. In this respect, the May data indicates that the upward movement in consumer confidence continues to be driven primarily by firming expectations following the recent stabilization in sentiment after the bout of uncertainty triggered by US–Iran tensions, rather than a broad-based recovery in current conditions. At the same time, the broadly flat trend in households’ willingness to spend on durable goods, which serves as an important leading indicator for domestic demand, does not point to a meaningful strengthening in demand conditions.

* The CBT will release the June Sectoral Inflation Expectations (SIE) Survey @ 10:00 local time. According to the CBT’s June 2026 Survey of Market Participants (SMP), market participants’ year-end 2026 CPI expectation increased from 28.9% to 29.1%, while the year-end 2027 inflation forecast edged up from 21.1% to 21.4%. Expectations for CPI inflation 12 months ahead remained unchanged at 23.8%, whereas the 24-month ahead expectation declined marginally from 18.4% to 18.3%. In line with the recent moderation observed in monthly inflation prints, June SMP results suggest that the pace of upward revisions to year-end inflation expectations has begun to lose momentum. We expect a similar pattern to be reflected in today’s Sectoral Inflation Expectations release, with household and real sector inflation expectations also likely to exhibit signs of a slower pace of deterioration.

* The unadjusted Real Sector Confidence Index (RSCI) increased by 0.2 points to 103.5 in June, while the seasonally adjusted measure rose by 1 point to 102.0, remaining above the neutral 100 threshold for a second consecutive month. As a reminder, the seasonally adjusted index had declined by 1.4 points to 98.6 in April, marking its first drop below the 100-threshold since July. Following its rebound above the neutral level in May, the improvement trend in the seasonally adjusted RSCI extended into June. Looking at the diffusion indices underlying the survey, assessments regarding expected production volume over the next three months, fixed investment spending, total orders received over the past three months, current overall order book levels, and the general business outlook all contributed positively to the index in June. By contrast, assessments related to finished goods inventories, expected total employment over the next three months, and export order expectations weighed on the aggregate index. Meanwhile, the Capacity Utilization Rate (CUR) increased from 74.2% to 74.5% in June, while the seasonally adjusted measure edged up from 74.1% to 74.3%. June data suggest that the recovery trend that began in May remains intact, pointing to a continued improvement in activity conditions across the manufacturing sector. The second consecutive monthly increase in both business confidence and capacity utilization indicates that the sharp weakness observed in April is giving way to a gradual rebalancing process on the production side. That said, tight financial conditions, softer domestic demand dynamics and persistent global uncertainties suggest that the pressure on economic activity has not fully dissipated. In this context, we believe that the improvement observed in leading indicators following April’s sharp deterioration may prove corrective in nature and remain limited in scope over the coming months. We therefore continue to interpret the recent improvement as a controlled and measured recovery in economic activity rather than the beginning of a stronger acceleration phase. While maintaining our cautious medium-term growth outlook, we keep our 2026 GDP growth forecast unchanged at 3.2%.