Producer confidence can’t stay high with such a dip in consumer confidence


One of the most striking pieces of data to be released in the last week was the consumer confidence index. The index fell to its lowest level ever with 67.3 points. (See graph: Consumer confidence index)

Consumer confidence has been extremely weak in the past year. The index has displayed its lowest values seen since January 2012, when the data was first recorded, in the past seven months. In other words, the seven data sets announced since October 2021 are the weakest index values in the last 10 years.

Let’s look at the confidence index from another angle. The index can technically display values between 0 and 200. Below 100 indicates that the confidence of the consumers in the economy is weak, and above 100 indicates that the confidence is strong. The problem is, consumer confidence hasn’t rated above 100 once since 2012. In other words, consumer confidence has been consistently negative. The latest data (67.3) indicates that consumers have never been so insecure.

There are four sub-indices that make up consumer confidence. Three of these hit their lows in April, with one at its second lowest ever. Consumers say the current economic situation and its prospects for the next year have never been as weak as they are now.


We will start the week with sectoral confidence indices. The real sector, services, retail, trade, and construction confidence indices will be announced this morning. There has been a divergence between consumer confidence and sectoral confidence (producer) indices in the country for some time. While consumer confidence trends downward, confidence in producer sectors is strong. One of the reasons for this is that exports are performing well.

However, the continued increase in exports does not explain the relatively strong courses for the services, retail and construction sectors. This leads us to the second factor, which is credit growth. Although consumer confidence is very low, one of the reasons why confidence has not declined on the production side is that consumers are spending more using credit. However, we do not expect this divergence between consumer and producer confidence to last long. The probability of weakening in sectoral confidence indices in the coming months is increasing.


Total house sales in March, announced last week, increased by 20.6% compared to the last year. Sales increased by 14.9% for new houses and 23.1% for second-hand houses. There is an increase of more than 20% in sales in the first quarter of the year.

Looking at the data only in this context, nothing seems out of the ordinary. However, second-hand houses have been dominating the housing market in Turkey for more than two years. While nearly half of the monthly sales used to come from new residences in the past, just 30% of sales have been of new residences since 2020.


New home sales (on an annualized basis) begin to decline beginning in the first half of 2019. Second-hand sales accelerated in the same period. Although a normalization seems to begin at the end of 2021, the gap started to widen again. One of the important reasons for the increase in sales in the recent period is likely the desire to protect savings against inflation.


The Inflation Report, which will be released on Thursday, will set the economic headlines for Friday morning.

The phrase, “The main aim of the Central Bank is to ensure price stability,” is written right next to the logo on the Central Bank website. The explanation under the heading, “Inflation Targets in Monetary Policy,” is as follows: “Achieving inflation targets is a very important factor in the management of monetary policies. To achieve this goal, the Central Bank manages aggregate demand and inflation expectations by using policy rates and other monetary policy tools. Inflation forecasts published by the Central Bank in the inflation targeting regime are also an important tool for guiding inflation expectations. The Central Bank’s inflation forecasts were explained with the Inflation Reports published in January, April, July and October.”

However, the Bank seems to be feeding inflation with the steps it has taken rather than fighting against inflation.

For this reason, we will need to closely observe what the Central Bank will say in its report on inflation, which the government itself aggravated with its policies last autumn.

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