Consumer confidence rising, domestic demand revitalizing

Central Bank President Erdem Başçı said the vitality of domestic demand, which is one of the significant components of inflation, has decreased but data does not confirm this view.

The data disclosed the other day shows increase in consumer confidence was on the rise again and that the vitality in domestic demand did not quite decrease.

In a presentation he held the other day, Başçı reiterated his view that the domestic demand started decreasing, the increase in loaning has slowed down and inflation, which will reach its peak in May, will start falling after that.

However on the day he delivered this statement, the Turkish Statistical Institute (TÜİK) issued a statement showing the increase in consumer confidence continued in April. While the consumer confidence index increased 5 percent in March, this increase was 7.9 in April, reaching 78.5 in total.

It is being observed that after the March 30 local elections, the facts that the atmosphere of political stability strengthened and foreign exchange rates gained a relative stability have played an important role in the rise in consumer confidence. While expectations regarding economy are observed to be recovering, the increase seen in the savings trend of households is carrying the total index higher. The index of the general economic situation expectation regarding the coming 12 months has increased 11.6 percent to reach 107 percent.

The probability of saving, on the other hand, has increased 10.4 percent in surveys.

CNBCE’s consumer confidence that was index announced last week has also shown an increase of 16.5 percent in April.

All together with these, we also see that efforts have started to make alterations in growth estimates of markets regarding this year. While the government’s growth target is 4 percent, the average estimate of the markets was 2.2 percent. However, if preliminary data confirms the continuation of this trend of increase, then we are estimating that markets will increase their growth estimates for this year first to 3.

Balances may be disrupted

It is a positive development for the government that the domestic demand has started increasing again. Because there is a presidential election in August and general elections at mid-year, the continuation of the liveliness in the markets provides an advantage politically. The government also, as understood from the increase rate of loans issued by public banks and also from the recent populist decisions, wants to keep the vivacity of the markets.

This is a normal trend, but from the point of economic equilibrium and stability, it is also a fact that the economy administration feels the need to pull the breaks. Başçı, for this reason, sees the slowing down of the pace of the increase in credit and the decline in domestic demand as a positive step. Because there is the risk of the inflation to hike to double digit figures and if the perception becomes widespread that inflation will stay at those levels permanently, then it would not be easy to maintain economic stability.

In short, as always, the political power wants to accelerate, but the Central Bank and the economy administration, on the other hand, do not want much speed. Developments in global economy will play an important role in this process, but the picture is already quite complicated…