Turkish industrial confidence drops to lowest level this year

Confidence among Turkish industrialists fell to the lowest level since December after the lira dropped against the dollar and inflation surged to the highest level in more than two decades.

Sentiment worsened to 106.4 points this month from 109.4 points in May, the central bank said in a monthly survey published on Friday.

The fall in confidence was led by the outlook for the volume of output over the next three months, which fell to 116.9 points from 123 points, and the general business situation.

A gauge for the total amount of orders over the past three months fell to 105.9 points in June from 114.5 points in May. That was the lowest level since March last year. The outlook for export orders worsened to 118.7 points from 120.6 points a month ago.

Turkey’s government is seeking to stimulate economic growth by awarding cheap loans to manufacturers and exporters, ignoring calls by foreign investors, economists and some business groups to raise interest rates to tackle inflation. The central bank’s benchmark interest rate stands at 14 percent. Consumer price inflation accelerated to an annual 73.5 percent in May, the highest level since 1998, while producer price inflation climbed to more than 130 percent.

The capacity utilisation rate of the manufacturing industry dropped to 77.6 percent this month from 78 percent in May, the central bank said in a separate statement. That was the lowest level since February.

Confidence in the services and retail industries also declined, the Turkish Statistical Institute said on Friday. Sentiment in the retail sector worsened to 118.7 points in June from 121.4 points in May. Confidence in the services industry fell to 119.6 points from 121.7 points. Sentiment in the construction sector improved to 83 points from 81.6 points, it said.

Turkish businesses are being hit by inflation and a decline in the value of the lira. The currency has lost almost a quarter of its value against the dollar this year. It fell by 44 percent in 2021. The lira was trading down 0.1 percent at 17.37 per dollar on Friday.

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