Turkish retailers’ confidence wavers as inflation bites

Bennett Dean/Alamy via Reuters Connect

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Confidence is falling among Turkish retailers, according to a survey from the country’s statistics agency Turkstat.

Shoppers have been scaling back on big-ticket purchases, spending instead on basic consumer goods as inflation piles pressure on household incomes.

May’s business confidence report, released by Turkstat on June 24, showed sentiment in the retail sector at its lowest level for more than two years. It fell by 3 percent, from 115.5 points to 111.7.

Despite the drop, sentiment remains well above the 100-point dividing line between an optimistic and a pessimistic outlook. 

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The sharpest decline came in sales activity. The index fell 8 percent month on month while confidence among respondents for the three-month outlook also retreated, down 3 percent, reversing a gain in April.

Sentiment also dipped in the services and construction sectors, though not to the same degree as for retail. 

The construction index was down 0.5 percent to 87.9 points, reflecting a slowing in demand for new projects and government plans to freeze many infrastructure developments. Services fell 1.5 percent, though to a still healthy 115.4 points.

While the shopkeepers were positive, there is a wide gap between sentiment in the sector and the public, underscoring consumer concerns over rising prices and Turkey’s economic outlook. 

Consumer confidence fell in May, according to Turkstat data issued on June 20, easing 3 percent to 78.4 points, its lowest level since December 2023. The sharpest fall was in household financial expectations, down 4 percent, and the general economic outlook for the coming year, which fell 2 percent. 

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Some of the dip in retail sector sentiment is down to shifts in consumer buying patterns away from technology and white goods, according to Professor Hüseyin Altaş, chairman of the board of the Turkish Federation of Shopping Mall Centres and Retailers.

“Previously, due to high inflation, the customer trend was to pre-buy goods in order to forestall price increases, so we had a good start early 2024,” he told AGBI. 

“However, in an inflationary economy, customers have deferred their technological or clothing needs and focused mostly on food, on feeding themselves. Within the retail sector food now is the locomotive.”

Although Altaş is expecting weaker turnover, he is forecasting stronger results for the sector later this year as inflation eases and the economy improves, prompting a move back to manufactured products. 

Turkey’s central bank has projected year-end inflation of 38 percent, down from May’s 75 percent. In mid-June ratings agency Fitch forecast Turkey’s economy will expand by 3.5 percent in 2024, up from its earlier estimate of 2.8 percent.