After months of high inflation, Turkey’s January business confidence report shows the situation is gradually improving.
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The Turkish Business Confidence Index for January 2024 was released on Thursday morning and stood at 100.9 this month, surpassing the one-year low of 99.1 recorded in December. This was mainly due to finished goods inventories rising from 95.2 in the previous month to 95.3 in January. The total number of orders also increased slightly from 83.8 to 85.1.
A score above 100 indicates an optimistic outlook for economic activity, while a score below 100 indicates a pessimistic outlook.
Furthermore, production expectations for the next three months are also on the rise, reaching 108.6, up from 102.5 in December. Next year’s inflation expectations fell from 58.8 to 55.
However, the employment outlook for the next three months remains bleak, falling from 108.8 to 107.2. The general business conditions index also fell to 90.4 from 93.5 in December.
Could Turkish inflation be coming down soon?
Turkey has been facing high double-digit inflation in recent months, largely due to current Prime Minister Recep Tayyip Erdogan’s unorthodox monetary policy stance over the years. The Prime Minister, in contrast to most of the world’s other central bank leaders, believed that keeping interest rates low would help control inflation.
However, once it became clear that inflation was rising sharply, Erdoğan quickly reversed this policy and replaced current central bank governor Hafiz Ghai Erkan as president.
As Turkish economist Mustafa Sonmez highlighted in Foreign Policy, “Many households’ incomes are insufficient to keep up with inflation, and poverty is now one of the biggest problems. Abnormal inflation.” We are seeing an uptick and people are feeling anxious and disappointed.”
But Turkey’s inflation expectations are finally starting to look brighter, with interest rates sharply raised to compensate for months of monetary policy easing. While December’s rate was still extremely high at 64.8%, it was slightly lower than analysts’ expectations of 65.1%.
French manufacturing remains lackluster
The French business sentiment report for January was also released, remaining stable at 99, the same as December, but below the market consensus of 100 as French manufacturing is still struggling slightly.
This was mainly due to lower sales due to slower economic growth and reduced domestic and international demand, as well as the postponement of several orders. Investment and intermediate goods are likely to be most affected by these developments, but consumer goods appear to remain resilient.
Amid declining demand and sales, some producers are also cutting back on production capacity and laying off an increasing number of workers, putting upward pressure on the unemployment rate. Manufacturers have also become more pessimistic in recent months, given the geopolitical turmoil the world is currently facing.
This is particularly due to the ongoing Red Sea conflict, with manufacturers around the world closely monitoring the impact on raw material and transportation costs. A decline in new orders and exports has recently put similar pressure on France’s services sector.
