Soft data from March and TurkStat hard data dating back to February suggest economy is decelerating mildly, with PMI surveys confirming the slow-down. On the other hand, March consumer surveys revealed conflicting results. Turkstat’s consumer confidence index continued to rise, while the series compiled by private broadcaster BloombergHT suggested the opposite.
To recall, all these data points reflect measurements prior to the arrest of CHP Istanbul mayor Ekrem Imamoglu and the massive street protests it triggered, which gave rise to a confidence shock among international investors and depositor, both of which fled to FX.
The following analysis treats February hard data, because there are substantial differences between national income data and these surveys. Also, with the exception of consumer confidence, survey data from March confirms the slow-down observed in February.
Trade Volume Slowed Down in February
Trade sales volume increased by 6.5% year-on-year in February, while retail sales volume rose by 12.2%. The Turkish Statistical Institute (TURKSTAT) released the trade sales volume index for February. According to the data, trade sales volume increased by 2.5% compared to the previous month. During this period, the sales volume for the wholesale and retail trade and repair of motor vehicles and motorcycles increased by 1%, wholesale trade sales volume by 3.4%, and retail trade sales volume by 1.1%.
Trade sales volume rose by 6.5% compared to the same month of the previous year. In the same period, the sales volume for the wholesale and retail trade and repair of motor vehicles and motorcycles declined by 3.6%, while wholesale trade sales volume increased by 6.1% and retail trade sales volume surged by 12.2%.
Retail sales volume increased by 1.1% on a monthly basis and by 12.2% annually in February. This marked the lowest annual growth in retail sales volume in the last seven months.
On a monthly basis, the highest increase was seen in medical products and cosmetics with 3.5%, while the biggest drop occurred in electrical goods and furniture with a decrease of 2.5%.
On an annual basis, sales of computers, books, and communication devices stood out with a 30.2% increase, while the largest decline was recorded in textiles, clothing, and footwear with a 5.6% decrease. As for total trade sales volume, there was a 2.5% monthly increase and a 6.5% annual rise in February.
Sharp Contraction in Industrial Production in February
According to data released today by TURKSTAT, industrial production in February 2025 shrank by 1.6%. On a yearly basis, the annual growth rate fell from 1.2% in January 2025 to a 1.9% contraction.
When we look at the breakdown by subsectors on a monthly basis, only 3 out of 12 subsectors recorded growth, while 9 showed contraction. The largest monthly increase was in the Electricity, Gas, Steam sector at 3.5%, followed by Energy at 1.3%, and Medium-High Technology at 0.7%. The sharpest declines were seen in Mining and Quarrying with 7.6%, High Technology with 6.9%, and Intermediate Goods with 2.9%.
On an annual basis, 5 out of 12 subsectors showed growth, while 7 contracted. The sectors with the highest growth were Electricity, Gas, Steam at 8.5%, Energy at 8.0%, and Low Technology at 0.9%. The largest annual contractions occurred in High Technology (-24.4%), Capital Goods (-6.7%), and Mining and Quarrying (-5.8%).
Alnus Investment Comment
The 1.6% decline in industrial production in February 2025 reflects the fading impact of rapid growth in certain sectors seen in December 2024. To elaborate: sectors like automotive saw front-loaded purchases to avoid impending tax and fee hikes. These purchases led to a sharp increase in industrial production in December (up 5.0%), including an extraordinary 51.6% rise in the High Technology sector. But as demand faded in January and February 2025, these sectors saw a corresponding drop in output.
Sharp Slowdown in Credit Card Spending
Card-based spending sharply slowed during the week of April 4. According to Central Bank of Turkey (CBRT) data, there was a 24% weekly decline, while the 4-week average growth rate fell to 36.5%, marking the lowest level in the past four years. The boycott on April 2, called for by the CHP, may also have contributed to the contraction observed in the first week of April.
Credit card spending is also a concurrent indicator of household consumption power. Data from the past four weeks signals that, amid rising inflation, consumers' purchasing power is deteriorating.
CONCLUSION
The latest data gathered by Central Bank of Turkey reveals credit extension is slowing too, while the sudden dollarization of the deposit base should in the coming months reduce capex and demand for house sales and autos. The biggest question mark is whether the ongoing political turbulence in Ankara is affecting the spending plans of the household and the private sector. One would expect a mild contraction in response to escalating political uncertainty, but there is no data available from past episodes about its size and duration.
A modest slow-down in domestic growth would be welcome to CBRT in its efforts to tame inflation. A severe slump, which is certainly in none of the economists’ forecasts is even better from the perspective of inflation, but may compel Erdogan to increase fiscal spending to preserve his sagging approval ratings.
Atilla Yesilada, PA Turkey staff, press sources
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