Managing economy is managing expectations…

Altınbaş University faculty member Dr. Mahfi Eğilmez recently mentioned surveys of expectations in one his articles, which I read with great interest while drawing my own conclusions.

As a matter of fact, I used to consider expectations survey rather redundant. However, the method used to prepare such survey was perfected over the years, starting to better the Real Sector and the opinions of people engaged in trade, and even becoming a key factor that drives economic life.

Professor Eğilmez Eğilmez includes 5 leading surveys of expectations. Here’s what I think about the four of these surveys:

• TurkStat’ “Economic Confidence Index” sums up consumer and producer expectations and tendencies regarding overall economic situation.
• TurkStat’s monthly “Sectoral Confidence Indices” measures the future expectations of enterprises that employ at least 10 people.
• TurkStat’s monthly “Consumer Confidence Index”, on the other hand, reveals the personal financial situation of consumers, their opinions on the economy and their future expectations while measuring consumer saving tendencies.
• CBRT’s monthly “Business Tendency Statistics and Real Sector Confidence Index” keeps track of executives’ opinions from manufacturing industry about the past, present and future.
When we observe the latest indices based on expectations surveys, we come to the three following conclusions:

  • We still haven’t achieved “balance” in economy.
  • And if it’s going to be a “V”-type improvement, we haven’t hit the bottom yet.
  • Therefore, the positive trend called “early signs of improvement” has not yet emerged.

“Different suggestions for different people…”

I wouldn’t want to waste your time by showing you some figures, but according to expectations surveys, a full-improvement in economy hasn’t been achieved yet. So, we better remain cautious. Here are my suggestions for different groups:

Individual investors: Do not over-diversify your portfolio, or you’ll lose control of it.

Real Sector: There’s nothing you can do about the investments you’ve already initiated. But, if you’re planning to engage in new ones, do not do it (for now)! Rather focus on exports.

Financial Sector: Risk parameters are changing by the minute. Do not sit in front of the computer all day. Go out there! Make on-site visits. Focus on cash flow rather than guarantee.

People engaged trade: Collection is the key. Be smart about the money you’re owed. Maintain continuous dialogue with your customers. Don’t lend what you can’t afford to lose.

Households: Set your spending and investment priorities straight and properly identify the method you will use to finance it. Do not waste the money that you will need tomorrow.