Economic confidence declines in December due to Covid cases and restrictions

Turkey’s economic confidence index fell to 86.4 in December. The fall in the index; resulted from decreases in service, retail trade and construction sector confidence indices. (Tera Yatırım)

Turkey’s economic confidence index fell to 86.4 in December. The fall in the index; resulted from decreases in service, retail trade and construction sector confidence indices. In December period, the service sector confidence index decreased to 70.4, retail trade confidence index was 87.6 and construction sector confidence index reached 73.3. While the consumer confidence index did not change at the level of 80.1; The real sector confidence index, which had a positive effect on the index, rose to 110.4.

 

After the economic activity that made the bottom due to the Covid-19 epidemic in March and April, the economic openings realized with the gradual loosening measures since the beginning of June explain the recovery in the following months. During this period, we saw an increase in sectoral confidence indices with the optimism brought about by the increase in economic activity. With the positive movement in sub-indices, the economic confidence index, which increased uninterruptedly until October, declined slightly due to the slowdown effect felt in the economy and the return of restrictive measures by increasing cases. In this context, the economic confidence index, which declined from 92.8 to 89.5 in November, decreased to 86.4 in December for the second month in a row.

 

If we explain the sectoral breakdowns; It is seen that the service sector confidence index, which shows the sharpest contraction, is affected by Covid restrictions. Within the scope of epidemic measures, measures such as closing restaurants, cafes and bars and curfews caused the service sector to experience the greatest contraction. The impact of Covid measures on the economy primarily affects the service sector in terms of activity, capacity and employment. While the retail trade sector also contracted in December, the effect will be felt less here, as online sales will largely compensate for the contraction in store sales. Social life and possible closures due to Covid measures negatively affect the shopping mall and retail side; However, we see the effect of increasing cumulative demand in basic consumption and the increase in online shopping in retail trade. The effect of tightening financial conditions and the consequent effects of housing loan rates in the construction sector are also observed.

 

In terms of real sector confidence index; Despite the tightening of financial conditions and the limitation of demand, and the increasing Covid cases, the growth effects in the manufacturing industry are also felt in 4Q20. However, it is still possible that the restriction measures will have a slowing effect on the overall economic activity. Expectations regarding the effectiveness of vaccination keep the production and order sides alive, while the upward trend in inflation has an upward effect on the product prices side.

 

Kaynak Tera Yatırım
Hibya Haber Ajansı