Brakes on Consumption, Gas on Services: July Confidence Indices Paint a Mixed Picture

July economic confidence data crystallizes the sharp divergence between recovery signals in the services and construction sectors and the slowdown in retail trade, sending mixed signals to the markets.

Services Sector Holds Steady as Retail Contracts

According to data from the Turkish Statistical Institute (TÜİK), seasonally adjusted confidence indices exhibited a clear divergence across sectors in July:

■The services sector index rose by %1.4 on a monthly basis to reach 112.

■The retail trade sector index declined by %1.6 to fall to 111 points.

■The construction sector index posted a limited recovery, increasing by %0.6 to reach 83.5.

Sectoral Divergence in Demand Expectations

In sectoral details, data regarding future expectations indicates different scenarios regarding businesses' ability to forecast the road ahead:

■In the services sector, demand expectations for the next three months increased by %3.7, while demand in the last three months decreased by %0.2.

■In retail trade, the expectation for business volume-sales in the next three months retreated by %3.8, deepening the cautious atmosphere in the sector.

■In the construction sector, the current level of orders received increased by %3.9, while the expectation for the total number of employees decreased by %2.3.

Markets are interpreting this data as a signal that the slowdown in domestic demand has particularly begun on the consumption front. While the rise in the services sector reflects positively on growth data, the sharp decline in retail indicates that inflationary pressures are dampening demand. Algorithmic trades are pricing service data as 'cautious optimism' and retail data as 'demand saturation'.