According to figures provided by Turkey’s state statistical institution TÜİK (TurkStat), Turkey’s seasonally adjusted economic confidence index recuperated by 11.8% to 82.2 points in July 2020 from 73.5 points in the previous month of June. This increase follows rallies of 20.4% in May and 19.1% in June after an initial collapse of 44.1% in April. The recoveries of the index in May, June and July reflect expectations that the economy will continue to revive following the lockdown due to the coronavirus pandemic. The 82.2 points level of the economic confidence index this month compares with the pre-pandemic 91.8 points recorded in March 2020.
In July, the services sector confidence sub-index surged 20.2% to 66.7 points. This index was followed by the construction sub-index which increased 11.6% to 87 points, the real sector confidence sub-index which increased 10.7% to 99.4 points, and the retail trade sub-index which increased 9.6% to 94.6 points. The consumer confidence sub-index lagged behind with a decrease of 2.7% to 60.9 points.
It is interesting to note that the construction sub-index has recovered by July to 87 points which is higher than its pre-pandemic level of 77.2 points in March. The surge in property sales in June and July as a result of cheap housing loans offered by state banks is no doubt the reason behind the increase in this sub-index, but it is doubtful that this will have a long-term positive effect on the construction industry in light of the continuing economic crisis. There is also an inexplicable difference between the consumer confidence sub-index at 60.9 points and the real sector confidence sub-index at 99.4 points and the retail trade confidence sub-index at 94.6 points, since these three indices are very much interrelated. The consumer confidence sub-index is more in the spotlight and this may result in difficulties in justifying increases in this index.
Despite periodic upward revisions by TurkStat, Turkey’s economic confidence index is still below the crucial 100 points level. In Turkey, the economic confidence index is a composite index that covers encompasses consumers’ and producers’ evaluations, expectations and tendencies about the general economic situation. The index is produced by a combination of a weighted aggregation of normalized sub-indices of consumer confidence, seasonally adjusted real sector (manufacturing industry), services, retail trade and construction confidence indices. The economic confidence index indicates an optimistic outlook about the general economic situation when the index is above 100, and contrarily indicates a pessimistic outlook when it is below 100.