Macro and Politics

* TURKSTAT will release August Consumer Confidence Index at 10:00 local time. The Consumer Confidence Index rose from 87.9 to 89.8 in July, while its three-month moving average increased from 86.4 to 87.8. Looking at the sub-components, the financial situation of households at present, the financial situation expectation of households over the next 12 months, and the general economic situation expectation over the next 12 months all improved, while the assessment on spending money on durable goods over the next 12 months declined. The weakening in the propensity to spend on durable goods reinforces signs of cooling domestic demand, while the increase in the headline index appears to have been driven predominantly by an improvement in expectations.

*The CBT will release the August Real Sector Confidence Index and Capacity Utilization Rate at 10:00 local time today. The unadjusted Real Sector Confidence Index (RSCI) fell by 1.3 points to 102.2 in July, while the seasonally adjusted index declined by 0.8 points to 101.2. Among the sub-components, expectations for export orders, employment and production supported the index, while assessments of current and recent orders and the general business outlook weighed on the headline reading. Meanwhile, the Capacity Utilization Rate (CUR) declined from 74.5% to 73.9%, while the seasonally adjusted measure eased from 74.3% to 73.8%. The simultaneous decline in the RSCI and CUR suggests that the recovery observed in June has lost momentum, pointing to renewed weakness in manufacturing activity. Accordingly, we maintain our cautious medium-term growth outlook and keep our 2026 GDP growth forecast unchanged at 3.2%.

*The CBT announced outright purchase auctions of fixed-coupon government bonds with maturities ranging from 2029 to 2034 yesterday, for a total amount of TL5bn. The auctions are part of the CBT’s previously announced strategy to strengthen its OMO portfolio, rather than a monetary easing measure. With around 68% of the existing OMO portfolio due to mature over the next three years, the CBT plans to conduct TL255bn of outright purchases throughout 2026 to maintain sufficient portfolio size and operational flexibility in liquidity management. The longer maturities targeted in yesterday’s auctions should also help extend the portfolio’s duration and smooth its relatively heavy near-term redemption profile. While the purchases will inject TL5bn of liquidity into the system and could exert some downward pressure on the yields of the securities involved, the market impact should remain limited given the size of the operation.

* Foreign investors recorded a net purchase of USD176.1mn in the equity market in the August 7–14 week, while posting a net sale of USD306.2mn in the bond market, excluding repo transactions. As a result, nine consecutive weeks of foreign inflows into the bond market came to a halt, while foreigners’ share in the total bond stock edged down from 7.3% to 7.2%. Over the same period, residents’ FX deposits (excluding gold and adjusted for the EUR/USD parity effect) declined by a modest USD90mn, while their total FX deposits (including gold and adjusted for the price effect) fell by USD297mn. Moreover, the CBT’s gross FX reserves increased by USD5.1bn to USD183.5bn in the August 7–14 week, while net FX reserves rose by USD4.1bn to USD67.0bn. The swap stock increased by USD438mn to USD12.9bn over the same period, while net reserves excluding swaps rose by USD3.7bn to USD54.2bn.