Turkish Consumer Sentiment Plummets Amid Inflation and Policy Uncertainty

A Stark Divergence Signals Deepening Pessimism

The release of October 2025 consumer confidence data paints a troubled picture for Turkey’s economic outlook, revealing a significant and problematic divergence in sentiment between the official figures and market-tracked preliminary indices.

The Turkish Statistical Institute (TÜİK) Consumer Confidence Index (CCI), compiled in partnership with the Central Bank (CBRT), saw a slight, yet persistent, monthly decline of only 0.3%, settling at 83.6. This modest dip confirms a two-month cooling trend, placing the index at its lowest point since July. While technically a decline, the slight magnitude might suggest a degree of stability or ‘adjustment’ to the high-inflation environment.

However, the Bloomberg HT Consumer Confidence Preliminary Index tells a starkly different story. This market-focused barometer recorded a sharp drop, plummeting by 6.90% from the previous month’s final reading to 65.54. This level is not only significantly lower than the TÜİK figure but also reflects a far more intense deterioration in sentiment over a single period. The stark gap between 83.6 and 65.54 highlights a critical psychological breakdown: while the broader population surveyed by TÜİK is pessimistic, the more forward-looking, market-sensitive cohort tracked by Bloomberg HT is signaling a genuine confidence crisis.

The Anatomy of the Decline: Expectations and Expenditure Collapse

The pessimism is structural, cutting across the key components that drive economic activity. The Bloomberg HT report explicitly notes that the decline stems from a simultaneous collapse in three areas: current situation perception, future expectations, and consumption propensity.

Breaking down the Bloomberg HT index confirms this severity:

• The Consumer Expectation Preliminary Index registered a dramatic 7.92% fall to 64.98. This substantial move suggests that households and individuals are rapidly losing faith in their financial and the country’s general economic trajectory over the next 12 months.
• The Consumption Propensity Preliminary Index, which measures suitability for purchasing durable goods, automobiles, and homes, suffered the largest hit, dropping by 8.69% to 72.53. This indicates a near-complete shutdown of consumer interest in large-scale, discretionary expenditures—a critical engine of Turkey’s domestic demand-driven economy.

The TÜİK sub-indices, despite their softer overall reading, reinforce this crucial point regarding spending:

• The TÜİK Expectations for Durable Goods Purchases sub-index fell by 1.6% to 104. Although it remains above the 100-point threshold (indicating slight optimism), the direction of travel aligns with the massive drop seen in the Bloomberg HT consumption component, confirming a definitive slowdown in the propensity to spend on big-ticket items.

The Policy and Inflation Backlash

The underlying drivers of this collapse in confidence are rooted in the current economic policy framework and the resultant consumer environment:

1. The Real Cost of Tightening Policy

The CBRT’s aggressive monetary tightening, which has pushed the policy rate to historic highs in its battle against chronic inflation, is now fully priced into consumer credit and loan markets. The high cost of borrowing, coupled with restrictive macro-prudential measures, effectively freezes major purchases. The drop in the consumption propensity index is a direct measure of the efficacy (and pain) of this tightening cycle—people simply cannot afford the interest payments on cars or homes.

2. Pervasive Inflation Expectations

Both analyses explicitly cite the relentless rise in inflation expectations as a primary factor. Even as official inflation figures may show a peak or deceleration in coming months, consumers’ day-to-day experience—especially with new season prices—translates into a deeply entrenched belief that their purchasing power will continue to erode. The Bloomberg HT report notes that the current deterioration is linked to political uncertainties and “negative developments in the stock market,” but the overarching shadow remains the inflation threat.

3. Forward-Looking Erase-and-Wait Strategy

A telling element in the Bloomberg HT analysis is the mention of seasonal discount expectations. The report suggests that the anticipation of November’s “Black Friday” and December’s year-end discounts for sectors like automotive is likely contributing to the pause in spending. Consumers, facing high prices now, are adopting an “erase-and-wait” strategy: they halt current purchasing decisions, hoping to capture a discount later or banking on potential sectoral relief (such as end-of-year inventory clearance).

Outlook: The Impending Slowdown

The October consumer confidence readings collectively suggest that Turkey’s economic rebalancing, aimed at cooling domestic demand to tame inflation, is beginning to take hold—perhaps more abruptly than desired.

The significant crash in future expectations implies that the pass-through from monetary policy to real economy activity is now accelerating. For policymakers, this suggests that the high-interest-rate medicine is starting to work by choking off demand. For businesses, particularly in the automotive, housing, and durable goods sectors, this confidence collapse is an ominous signal of impending demand softness and inventory build-up through the remainder of the year.

While the small uptick in the TÜİK general economic expectation (up 0.7%) might suggest a flicker of hope regarding the government’s long-term program, the overwhelmingly negative sentiment dominating the consumption and financial outlooks confirms that the immediate path for the Turkish economy remains challenging and dominated by household reluctance. The priority for investors and firms operating in Turkey must now shift from managing inflation risk to managing demand shock.