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Türkiye’s Real Sector Confidence Index Rises in July 2025

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Türkiye’s Real Sector Confidence Index (RKGE), adjusted for seasonality, recorded a modest improvement in July 2025. According to data released by the Central Bank of the Republic of Türkiye (TCMB), the index rose by 0.5 points from the previous month, reaching 98.9.

This slight yet significant increase signals cautious optimism among businesses regarding the country’s economic outlook. While the index remains below the neutral threshold of 100, the upward movement suggests that industrial firms are gradually regaining confidence in future production, employment, and investment conditions.

Positive Drivers Behind the Increase

The Central Bank explained that several factors contributed positively to the index:

  • Production volume expectations for the next three months improved.

  • Businesses expressed optimism about employment outlook for the upcoming period.

  • Firms anticipated higher levels of fixed capital investments.

  • The overall economic outlook (general gidişat) was viewed more positively.

  • Export order expectations for the next quarter strengthened.

Together, these improvements pushed the Real Sector Confidence Index higher, reflecting stronger expectations for economic activity in the second half of the year.

Negative Pressures on the Index

Despite these gains, certain indicators continued to weigh on business confidence. The Central Bank noted that:

  • Current total orders were weaker compared to previous months.

  • Past three months’ order volumes declined, indicating a slowdown in realized demand.

  • Finished goods stock levels were considered relatively high, which may signal challenges in reducing inventory.

These negative developments partially offset the overall improvement, keeping the index below 100 and suggesting that recovery is still fragile.

Seasonally Unadjusted Index Declines Slightly

While the seasonally adjusted index rose, the unadjusted Real Sector Confidence Index painted a different picture. In July, the unadjusted index fell by 0.1 points compared to June, coming in at 100.2.

This indicates that while businesses feel more optimistic about the future, recent performance data—particularly regarding orders—remains somewhat subdued.

Business Assessments for the Past Three Months

Looking at retrospective evaluations, firms reported weaker trends compared to earlier in the year:

  • The positive momentum in production volume growth slowed.

  • Assessments of domestic market demand shifted from growth in June to contraction in July.

  • Similarly, export demand assessments weakened, with more businesses reporting declines in orders rather than increases.

These insights reveal that while companies faced headwinds in recent months, their forward-looking outlook appears more resilient.

Forward-Looking Expectations Strengthen

The Central Bank emphasized that expectations for the upcoming period grew more favorable:

  • Production volume expectations for the next three months improved compared to June.

  • Businesses expect export orders and domestic market demand to increase in the near term.

  • Outlook for employment levels strengthened, with more firms planning to expand their workforce.

  • Fixed capital investment expectations for the next 12 months also became more optimistic, signaling greater willingness to commit to long-term projects.

This forward-looking optimism suggests that businesses are positioning themselves for a recovery in both domestic and international demand.

Cost and Price Expectations

The survey also shed light on firms’ expectations regarding costs and prices:

  • Average unit costs are expected to continue rising in the next three months, with more companies reporting cost increases both retrospectively and prospectively.

  • Expectations for sales price increases over the coming months have strengthened, suggesting that inflationary pressures will persist in the short term.

  • Interestingly, expectations for Producer Price Index (PPI, ÜFE) inflation eased slightly. The 12-month ahead PPI expectation declined by 0.4 points, settling at 36.8%.

This indicates that while businesses expect short-term pressures on costs and prices, they see inflationary momentum cooling somewhat in the longer horizon.

What the Numbers Mean for Türkiye’s Economy

The July 2025 Real Sector Confidence Index highlights a mixed but improving economic landscape:

  • On the one hand, weaker demand and high inventory levels still create challenges for businesses.

  • On the other, rising production, export, and investment expectations suggest a cautious return of confidence.

Economists argue that maintaining this momentum will depend on stabilizing domestic demand, supporting exports, and curbing inflationary pressures that continue to affect cost structures.

In summary, Türkiye’s Real Sector Confidence Index rose to 98.9 in July 2025, reflecting a cautious but improving business sentiment. Stronger expectations for production, exports, employment, and investments were the main drivers of the increase, while weaker orders and inventory concerns limited the overall improvement.

Although still below the neutral 100 mark, the upward trend suggests that Türkiye’s industrial sector is gradually regaining optimism about the country’s economic future.

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