Skip to content
News from Turkey

Turkey Macro Outlook: Demand Signals Stabilize as Industrial Production Limps into 2026

tr economy

The final data flow for December 2025 reveals a striking divergence in the Turkish economy: while consumer demand and business confidence are showing signs of a gradual recovery, the manufacturing sector remains mired in a period of prolonged weakness. Despite the sluggish year-end performance, expectations for 2026 are shifting toward a more optimistic narrative.

Manufacturing: A Historically Weak Performance

The manufacturing sector concludes 2025 with production indicators remaining soft. A key metric, the Capacity Utilization Rate (CUR), averaged just 74.3% for the year.

  • Historical Lows: Excluding the anomaly of the 2020 pandemic, 2025 represents the lowest capacity utilization level in Turkey since 2010.

  • Sectoral Pain: The most significant declines were witnessed in machinery-equipment, computers-electronics, motor vehicles, and textiles.

  • Silver Linings: December saw a slight uptick in construction-related sectors (metals, minerals, rubber-plastics) and food/clothing, though investment goods and durable consumer goods continue to struggle.

Confidence Indices: A Fragile Recovery

In contrast to the weak production data, business and consumer sentiment indices are trending upward, suggesting that the worst of the demand contraction may be over.

  • Real Sector Confidence: The seasonally adjusted Real Sector Confidence Index (RKGE) rose to 103.7 in December—the highest value since late 2023. This is a critical psychological threshold, as moving above 100 indicates an optimistic outlook.

  • Retail and Service Surge: Retail confidence reached its highest level since February, fueled by a marked increase in business volume over the last quarter. Similarly, the services sector hit a nine-month high, driven by improved expectations for future demand.

TÜSİAD Cost-Based Competitiveness Index Rises in Q3 2025

The Inflation and Cost Equation

While inflationary pressures show signs of a slight easing at the cost level, businesses remain wary.

  • Expectations: Cost increase expectations for the first quarter of 2026 remain elevated, mirroring last month’s concerns.

  • Employment: There is a limited improvement in hiring trends, though employment indicators have yet to return to their historical averages.

2026: Looking for the Turning Point

As Turkey leaves behind a difficult 2025, the “General Situation” expectations for 2026 are painting a more hopeful picture. Analysts suggest that if the current recovery in orders and sales volume sustains, the manufacturing sector may finally begin to close the output gap in the coming year.

Source:  Akbank Research Department

PA Turkey intends to inform Turkey watchers with diverse views and opinions. Articles on our website may not necessarily represent the view of our editorial board or count as endorsement.

Follow our English YouTube channel (REAL TURKEY): https://www.youtube.com/channel/UCKpFJB4GFiNkhmpVZQ_d9Rg

Twitter: @AtillaEng

Facebook: Real Turkey Channel: https://www.facebook.com/realturkeychannel/

Related articles