Consumer confidence rebounds in November with Turkey's political stability

Published 20.11.2015 20:39

The consumer confidence index rebounded in November, reaching a 19-month high this month. The index increased 22.9 percent compared to October, according to a consumer tendency survey carried out by the Turkish Statistical Institute (Turkstat) and the Central Bank of the Republic of Turkey. The index, which stood at 62.78 in October, rose to 77.15 this month, its highest level since April 2014. This remarkable increase was announced after the Justice and Development Party (AK Party) won a majority in Parliament as the sole governing party.

This year the consumer confidence index dropped to the lowest level in six-and-a-half years when uncertainties about the global economy and financial circumstances peaked and political uncertainty prevailed in Turkey from June 7 until the Nov. 1 parliamentary elections and terror acts and geopolitical risks escalated in the surrounding region. In September the index declined to the lowest level since January 2009, down to 58.5 percent. With coalition talks fizzling out after political parties failing to form a single-party government in the wake of the June 7 elections, consumers and the business community were urged to be more cautious. This being the case, both consumption and investment plans were postponed.

Moreover, the financial situation expectation and the general economic situation expectation indices rose 10.5 percent and 30.9 percent compared to the October shift of 86.58 to 95.66 and 80.87 to 105.90 respectively, reflecting an increase in the ratio of households that expect a better financial and general economic outlook over the next 12 months. Also, the unemployment expectation index increased 31 percent while the probability of saving index rose 17.3 percent compared to October.

Surveys of 4,314 households conducted in the two weeks after the Nov. 1 elections found that consumer confidence in the economy has risen in the last 12 years thanks to political stability. Analysts indicate that achieving a majority, which is needed for single-party rule, results in stability both for the business world and foreign investors. Pointing out that political stability accompanies economy stability, analysts say that consumers and investors will actualize their postponed consumption and investment plans in the next 12 months, as they expect the investment environment to recover.

Bora Tamer Yılmaz, an economist for Ziraat Investment, said that along with that the Fed's rate hike not being a cause for fear, stability has come from having a single-party government as well as Turkey's successful leadership of the G20 summit, which is reflected in the data. ALB equity research analyst Enver Erkan said that uncertainty vanished after the Nov. 1 elections, which made investor expectations more optimistic. Moreover, Garanti Investment's senior economist Gizem Öztok Altınsaç said that the index has been "increasing swiftly" because of the positive expectations about the economic outlook. Science, Industry and Technology Minister Fikri Işık said that the confidence index increased following the elections. Işık also expressed his strong belief that even higher increases in the index are coming in the following months after the formation of a strong Cabinet, adding that all of these may also contribute to growth in the near future through the upward revision of growth expectations for 2016.

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