WOOD Flash – Turkey macro: CBT focusing on price stability, on the back of improved ESI in January

In January, the European Commission’s economic sentiment indicator improved significantly, reaching strong expansion territory, at 109.3pts. This is not only much higher than the post COVID-19 peak in October 2020, but it is also the highest ESI level reached in many years. This ESI level, if maintained, is coherent with a quarterly GDP expansion of 10% in 1Q21E. However, we advise caution, as we believe the leading indicator was influenced by one-off factors, which are likely to reverse in the coming months. The most significant driver of this increase was a meaningful pick-up in services sector confidence. However, except for construction confidence, which is not available this month, and industrial confidence, which declined marginally, consumer and retail confidence also saw an improvement, with retail confidence reaching +2.3pts, the highest level since the restrictions started last spring. We expect this ESI level to be a one-off, on the back of temporary effects related to the vaccine implementation and the positive juncture of the economy.