Macro and Politics

*The CBT will release the July Real Sector Confidence Index and Capacity Utilization Rate @ 10:00 local time today. 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%.