• From a practical standpoint, the move does not affect the current cost of borrowing for Turkey’s banks, which has recently hovered around 8%.  But as a signal, it clearly indicates that policymakers foresee a less acute risk of inflation ahead, and also a more favorable trend regarding the current account deficit.

2-22-12–EMG INDICATORS AND INSIGHTS _Turkey’s Monetary Policy_

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A closer look at the data:

*    The ICSC/GS was more upbeat with a “solid” increase last week, with a 3.2% y/y gain in the week ending Feb 18, up from 2.8% the previous week.  The index cited positive factors of Valentine’s Day, a bout of winter weather in some regions, and “whiffs” of spring-like weather elsewhere.  Sales remained volatile but this time surprised on the upside unlike the previous week.  The index looks for comparable store sales gains of 3.0% to 3.5% for the month.

*    The Redbook saw a 2.9% y/y increase compared to 2.7% the previous week.  This is close to implied 3.0% target gain for February.

Like the ICSC/GS survey, Valentine’s Day and milder weather helped sales. 

The bottom line:  Sales remain volatile, as strength this week followed some weakness in the previous week.  Nonetheless, y/y sales gain of around 3% are at the lower end of recent trends.  Remember February is a “transitional” month with relatively slow (and volatile) sales, with winter clearance items mixing in with the early introduction of spring items.  Investors should into read too much into the weekly reports at this time of year.

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