Turkey consumer confidence dips in July

Consumer confidence in Turkey fell in July, signalling that the government’s hopes for a strong economic recovery in the second half of the year may face headwinds.

Confidence among households dropped to 60.9 from 62.6 in June, ending two-straight months of increases, the central bank and Turkish Statistical Institute said on Thursday. The index had stood at 72.7 in July last year.

Any reading below 100 reflects pessimism among consumers.

Turkey’s government is seeking to boost spending and manufacturing following the easing of a population lockdown at the end of May designed to curb the spread of the coronavirus. The measures have included cheap lending by state-run banks and debt restructuring. The central bank has backed the government’s efforts by slashing interest rates.

Expectations for the general economic situation in the country declined to 82.2 points from 85.5 in June. Sub-indexes for employment and the propensity to save also fell.

Inflation in Turkey is accelerating, eroding spending power, after the central bank slashed the benchmark interest rate to 8.25 percent from 24 percent a year ago. Consumer price inflation climbed to 12.6 percent in June from 11.4 percent in May.

Turkish President Recep Tayyip Erdoğan said this month that he expects a strong economic recovery in the second half of the year as Turkey and the rest of the world emerge from a slump caused by the coronavirus.

The central bank was expected to keep interest rates on hold for a second month at a meeting of its Monetary Policy Committee on Thursday due to inflationary pressures, according to polls of economists conducted by Bloomberg, Reuters and the state-run Anadolu news agency.