Confidence among businesses operating in Turkey’s retail sector fell after inflation in the country hit the highest levels since 1998, the cost of borrowing rose and the lira extended its declines by against the dollar.
Sentiment deteriorated to 113.4 points in July from 118.7 points in June, falling at the fastest rate in 15 months, the Turkish Statistical Institute said on Monday. Confidence was at its lowest since August 2021, the data showed.
The Turkish government has sought to stimulate economic growth by cutting interest rates despite inflationary pressures. This has led to inflation approaching 80% annually. Authorities have since taken indirect steps to dampen demand for imports and other goods by making it more expensive for consumers to borrow.
Annual interest rates on consumer loans averaged 35.4% in the week to July 15, from less than 30% at the end of May, according to central bank data. The bank’s reference interest rate is 14%. The lira, which traded at 17.82 to the dollar on Monday, has lost 16% of its value since the end of May and fell 6.3% in July alone.
Confidence in the services sector fell to 117.8 points this month from 119.6 points in June, the institute said. Sentiment in the construction industry improved to 85 points from 83 points. Any reading above 100 points reflects optimism.
Industrial confidence in Turkey fell to 103.7 points in July from 106.4 points a month earlier, the central bank said in a separate survey released on Monday. It was the lowest level since December, according to the figures. Capacity utilization in the manufacturing industry fell from 77.6% to 78.2%, the bank said.