Macro and Politics

* August Employment figures will be released at 10:00 local time. The seasonally adjusted unemployment rate rose from 7.6% to 8.1% in July, while the broad underutilization rate — a more comprehensive gauge of labor market conditions, which includes time-related underemployment, potential labor force and unemployment — increased from 28.8% to 30.6% over the same period. A breakdown of the subcomponents shows that the combined rate of time-related underemployment and unemployment rose from 18.6% to 20.8%, while the combined rate of unemployment and potential labor force increased from 19.2% to 19.5%. July’s data suggest that the improvement observed in the labor market in June proved short-lived, with signs of weakness becoming more pronounced once again. In particular, the rise in the broad underutilization rate back above the 30% threshold, coupled with the marked increase in time-related underemployment, indicates that significant slack persists in the labor market beyond what is captured by the headline unemployment rate.

* TURKSTAT will release August foreign trade figures at 10:00 local time. Preliminary August data from the Ministry of Trade point to a narrowing in the foreign trade deficit. Exports increased by 8.1% y/y to USD23.5bn, while imports rose by 10.5% y/y to USD28.7bn. Accordingly, the preliminary foreign trade deficit narrowed to USD5.2bn in August from USD7.3bn in July, while the trailing 12-month deficit widened to USD97.5bn from USD96.5bn. For August, we expect the current account to post a surplus of USD4.4bn. Our projections point to a decline in the balance of payments-defined foreign trade deficit to USD2bn, alongside net travel revenues exceeding USD7bn and the services surplus reaching around USD9.5bn. We maintain our year-end current account deficit forecast at USD54bn, equivalent to 3% of GDP.

* The Economic Confidence Index rose by 0.7% from 100.6 to 101.3 in September, reaching its highest level since 2023 and remaining above the 100 threshold for a second consecutive month. Among the sub-indices, the Consumer Confidence Index increased by 1.3% to 91.9, while the Retail Trade Confidence Index rose by 1.1% to 111.3. The Real Sector Confidence Index edged up by 0.1% to 102.5, while the Services Confidence Index remained unchanged at 111.9. The Construction Confidence Index, meanwhile, declined by 0.2% to 82.9. The rise in the Economic Confidence Index to its highest level since 2023 supports our expectation of a gradual recovery in economic activity in the second half of the year. Yet, the divergence across sub-indices and the marginal improvement in real sector confidence suggest that the recovery has yet to become strong and broad-based. We therefore maintain our 2026 GDP growth forecast at 3.2%, while assessing the risks as modestly skewed to the downside.