Macro and Politics

* Istanbul Chamber of Industry (ICI) Turkey Manufacturing PMI edged down to 47.9 in September from 48.1 in August, remaining below the 50 threshold for the 30th consecutive month, while the quarterly average rose to 47.9 in 3Q26 from 47.5 in 2Q26. Weak demand conditions remained the main drag on the manufacturing sector, with output falling for a fourth straight month and both new orders and new export orders remaining under pressure. Meanwhile, input cost and output price inflation accelerated to four-month highs amid higher fuel, transportation and raw material costs. The sectoral PMI survey also pointed to broad-based weakness, as output contracted in nine of the ten sectors monitored. On the consumption side, the Bloomberg HT Consumer Confidence Index fell 8.2% m/m to a six-month low in September, while the Consumption Tendency Index declined 12%, adding to signs of softer domestic demand. Nevertheless, other high-frequency indicators, particularly strong annual growth in retail sales and resilient services activity, continue to point to GDP growth above 3% y/y in 3Q26, versus 2.3% in 2Q26. We maintain our 2026 GDP growth forecast at 3.2%, with risks modestly skewed to the downside.

* Foreign investors added a net USD358.6mn to their equity holdings in the September 18–25 week, while recording net sales of USD410mn in the bond market, excluding repo transactions. This marked the strongest weekly foreign inflow into equities since the week of June 19, while net foreign selling in the bond market extended into a second week. Foreigners’ share in the total bond stock fell from 6.9% to 6.7%, its lowest level since early July. During the same week, residents’ FX deposits (excluding gold and adjusted for the EUR/USD parity effect) increased by USD1.3bn, while their total FX deposits (including gold, adjusted for the price effect) also rose by USD1.3bn. The decline in the CBT’s reserves persisted in the September 18–25 week. Gross reserves decreased by USD3.2bn to USD171.2bn, while net reserves fell by USD2.4bn to USD53.3bn. The swap stock, meanwhile, rose by USD781mn to USD13.5bn, bringing net reserves excluding swaps down by USD3.2bn to USD39.8bn.