Confidence among firms operating in Turkey’s retail industry dropped after inflation in the country extended the highest levels since 1998, the cost of borrowing rose and the lira extended declines against the dollar.
Sentiment deteriorated to 113.4 points in July from 118.7 points in June, falling at the fastest pace in 15 months, the Turkish Statistical Institute said on Monday. Confidence was at the lowest level since August 2021, the data showed.
Turkey’s government has sought to boost economic growth by cutting interest rates despite inflationary pressures. That has led to inflation approaching an annual 80 percent. The authorities have since taken indirect measures to curb demand for imports and other goods by making borrowing for consumers more expensive.
Annual interest rates on consumer loans averaged 35.4 percent in the week to July 15 compared with less than 30 percent at the end of May, central bank data showed. The bank’s benchmark interest rate stands at 14 percent. The lira, which was trading at 17.82 per dollar on Monday, has lost 16 percent of its value since the end of May and has dropped by 6.3 percent in July alone.
Confidence in the services sector declined to 117.8 points this month from 119.6 points in June, the institute said. Sentiment in the construction industry improved to 85 points from 83 points. Any reading of above 100 points reflects optimism.
Industrial confidence in Turkey dropped to 103.7 points in July from 106.4 points a month previously, the central bank said in a separate survey published on Monday. That was the lowest level since December, the figures showed. Capacity utilisation of the manufacturing industry rose to 78.2 percent from 77.6 percent, the bank said.