UPDATE 2 - Turkey's consumer confidence index goes up in July

UPDATES WITH COMMENTS FROM EXPERT AND BACKGROUND INFORMATION

By Muhammed Ali Gurtas

ANKARA (AA) - Turkish consumers' confidence in the country's economy has gone up in July, rising 4 percent, month-on-month, according to Turkey's statistical authority on Monday.

The consumer confidence index stands at 73.1 this month, while it was 70.3 in June. The index value is figured out in cooperation with the TurkStat and the Central Bank by measuring tendencies of consumers.

Last month, the consumer confidence index rose 0.6 percent from 69.9 in May. Since the beginning of this year, the index value hovered between 73.1 and 69.9 -- highest this month and lowest in May.

Consumers’ assessments and expectations on nearly 20 economic and financial items are measured in monthly tendency surveys.

According to the TurkStat, the consumer confidence index calculated from the survey results is evaluated within the range of 0-200, indicating an optimistic outlook when the index is above 100, a pessimistic outlook when it is below 100.

Last year, the highest consumer confidence index value was recorded in May with 72.8 while it was down in the last five months of 2017 and stood at 65.1 in December.

This July, consumers' expectations for a better general economic situation in the next 12 months increased, as the general economic situation expectation index is 96.3 -- rising 4.6 percent from 92.1 in June.

"The number of people unemployed expectation index climbed by 1.9 percent, compared to June and became 76.9 in July," TurkStat said. "This increase stemmed from the decline of people expecting an increase in the number of unemployed persons in the next 12 months."

The financial situation expectation of household index, showing consumers' expectations for a better financial situation of household in the coming 12 months, also rose by 3.3 percent to reach 92 this month.

On the saving side, TurkStat reported that the consumers' tendencies to save money for the next 12 months period rose, as a result, the probability of saving index which was 24.6 last month increased by 10.2 percent to 27.1 in July.

Turkey's statistical authority will release the next results on August 17.

- End of political uncertainty

At 73.1, the consumer confidence index hit a 2-year high this month, as the index rose over 9 percent compared to 67 in July 2016.

Enver Erkan, an economist at GCM Menkul Kiymetler, told Anadolu Agency that the end of political uncertainty following the June 24 presidential and parliamentary elections is the main factor of increasing consumers' confidence in the economy.

"Naturally, a recovery in the consumers' perception of the current situation is observed, as people were waiting for the passing of the uncertainty," Erkan said.

Turkey officially switched to a new presidential system of government after the elections. President Recep Tayyip Erdogan won with 52.59 percent votes while the ruling Justice and Development (AK) Party garnered 42.56 percent of votes.

"The rise in exchange rates may have limited the recovery in consumers' confidence," Erkan said.

"High interest rates and volatility in exchange rates may possibly continue to have a negative impact on the consumption trend."

This January to June, one U.S. dollar was exchanged for 4.09 Turkish liras on average while the average USD/Turkish lira rate was 3.65 last year. This May, the exchange rate saw a historic high over 4.90.

"However, the economy management can eliminate the negative issues by ensuring monetary and fiscal policy coordination and taking positive measures," Erkan said. "A down in inflation and more stable exchange rates can be reflected as an increase in consumption trends."

In June, consumer prices in Turkey rose 15.39 percent year-on-year, while the figure was 12.15 percent in May and 10.85 percent in April.

Last month, Turkish Central Bank increased the one-week repo rate -- also known as the bank's policy rate -- to 17.75 percent, up 1.25 percentage points from 16.5 percent.