The economy of trust: Whatever the consumer feels, the market will experience it after a while!

The true pulse of the economy often beats not in data, but in the minds of people. Interest rates, growth figures, and inflation curves are merely the visible face of the story; the real determinant is the consumer's belief in the future. When households do not trust tomorrow, even if the economy grows on paper, behaviors contract, demand is postponed, and the market becomes more fragile than it appears. For this reason, consumer confidence is not just an index; it is a critical compass that predicts the direction of the economy.

Economies do not function solely through numerical indicators; there is a quieter but often more decisive element in the background: trust. When consumers approach the future with caution, spending patterns change; major purchases are postponed, the appetite for credit weakens, and the tendency to save strengthens. Economic cooling often begins in behavior before it is reflected in statistics. In this respect, consumer confidence is not just a measurement of sentiment, but also a powerful leading indicator of the course of household consumption and savings trends. Indeed, the OECD also defines this indicator as a standardized reference that points to the future direction of economic behavior.

However, an important methodological distinction must be emphasized here. The Consumer Confidence Index created in Turkey in cooperation with TurkStat and the CBRT, the OECD's amplitude-adjusted series, the indicator calculated with the European Commission's balance approach, and The Conference Board's 1985=100 based US index do not share the same measurement framework. In Turkey, the index is evaluated in the 0–200 range, and while values above 100 indicate optimism, the OECD indicator is standardized so that its long-term average is 100. While European Commission data often hover in the negative zone, the index used in the US is constructed through different components. Therefore, when comparing countries, focusing on trends, breaking points, and the economic context they are in, rather than absolute levels, provides a healthier reading.

WHAT IS CONSUMER CONFIDENCE; WHY IS IT SO IMPORTANT IN THE ECONOMIC SYSTEM?

Consumer confidence is the collective response of households to their own financial situation, the general course of the national economy, and their expectations for the future. In simpler terms, it is the answer the citizen gives to the question, "Where am I today, where will I go tomorrow?" If this answer is positive, consumption remains vibrant; if negative, domestic demand weakens. Especially in economies where the share of consumption in national income is high, this indicator produces not only psychological but also direct material results. Indeed, The Conference Board also defines consumer confidence as a combination of perceptions regarding current conditions, expectations for the future, and purchase intentions. The fundamental truth underlined by this definition is this: trust is a prerequisite for spending behavior.

For this reason, consumer confidence often speaks before growth data. Growth is the result of the past period; trust is the intention of the coming period. While economic contraction is reflected in statistics with a delay, the loss of confidence is felt immediately in the daily decisions of households. People first start to postpone, then cut spending, and finally accept a lower standard of living. At this very point, a critical threshold emerges: When confidence falls, consumption does not collapse all at once; it is first postponed, then shrinks, and over time settles into a new equilibrium. This process shows that the economy is cooling more slowly but more deeply than it appears.

HOW IS THE INDEX CALCULATED; WHICH PARAMETERS DOES IT CONSIST OF?

In Turkey, the consumer confidence index has been calculated as the average of four main components following the September 2020 revision: the household's current financial situation, the financial situation expectation for the next 12 months, the general economic outlook expectation, and the tendency to spend on durable consumer goods.

This structure has been simplified to be compatible with European Union practices and redesigned to highlight the expectation dimension. While measuring the index in the 0–200 range and having the 100 threshold value represent the optimism-pessimism boundary makes interpretation technically easier, it is not sufficient on its own. The real meaning emerges in how the sub-components diverge from each other.

On a global scale, methodological differences are evident. The OECD indicator is based on responses regarding the household's financial situation, general economic outlook, unemployment expectations, and savings capacity, and is standardized so that its long-term average is 100. The European Commission's approach is based on the "balance" logic, and therefore negative values are not an anomaly, but a natural result of the measurement technique.

In the US, The Conference Board index is read on two axes: current situation and expectations. In particular, the expectations sub-index falling below the 80 level is historically considered a recession signal. These different methodologies give us an important warning: Consumer confidence should be read not through absolute levels between countries, but through trends and breaking points. Otherwise, it becomes inevitable to look at the same data and reach completely different conclusions.

CONSUMER CONFIDENCE IN TURKEY IS STAGNANT IN THE 2024–2026 PERIOD: Optimism in Expectations, Fragility in the Current Situation

Looking at the course of consumer confidence in Turkey over the last two years, the picture is clear: there is a recovery, but trust has not yet been built. The index started 2024 at the 80.4 level and showed limited fluctuations throughout the year. It gave a remarkable signal of improvement by rising to 85.9 in the first quarter of 2025; however, it fell back to the 83.5 level at the end of the year. In the first months of 2026, it followed a horizontal course in the 85 band.

Reading this picture as "the recovery has begun" would be too optimistic; saying "nothing has changed" would be incomplete. The more accurate reading is this: Consumer confidence in Turkey is increasing, but this increase does not produce strong optimism; it only reduces the intensity of pessimism. The April 2026 data shows this fragile balance more clearly. Although the rise of the index to 85.5 technically indicates an increase, remaining well below the 100 threshold value reveals that households are maintaining their cautious stance. What is more striking is the divergence in the sub-items.

The decline of the indicator reflecting the household's current financial situation to 71.8 clearly reveals that the perception of today has weakened. In contrast, the rise of the financial situation expectation for the next 12 months to 87.5 shows that hope for the future has not been completely lost. However, the decline in the general economic outlook expectation in the same period reveals that this optimism remains fragile and limited. This divergence tells us a critical psychology: In Turkey, the consumer acts with the feeling that "today is difficult, tomorrow is uncertain, but there is a possibility of hope."

On the other hand, the increase in the tendency to spend on durable consumer goods, although it may seem contradictory at first glance, actually points to rational behavior. This increase can be explained either by the activation of postponed demand or by consumption brought forward with the expectation that "it will be more expensive tomorrow." In other words, this data reflects a position taken against inflation rather than a strong sense of prosperity.

In the general framework, consumer behavior in Turkey exhibits a three-layered structure:

The perception of the current situation is weak, expectations are cautious, and behaviors are progressing along a pragmatic line that adapts to conditions. At this point, the distinction between macro data and household sentiment becomes clear. While the economy continues to grow and inflation is relatively slowing, the fact that the price level remains high continues to suppress the perception of prosperity. In other words, disinflation may be occurring; however, life is not getting cheaper.

Precisely for this reason, consumer confidence remains stickily low. Because for the citizen, what is decisive is not only the direction of inflation, but the level it has reached. Confidence does not recover quickly when prices do not fall, but only the rate of increase slows down. As a result, consumer confidence in Turkey exhibits an appearance that reacts to policy changes but is not yet convinced. This tells us the following: A technical improvement in the economy may have begun; however, social trust is not yet accompanying that improvement.

GLOBAL OUTLOOK: The World Is Not Fully Convinced Either!

When looking at consumer confidence on a global scale, the picture is not completely different from Turkey; only the source of the problems changes. There is no clear wave of optimism worldwide; on the contrary, a fragile balance prevails.

On the European front, confidence has been weak for a long time. European Commission data shows that consumer confidence remained in the negative zone from the end of 2024 to the beginning of 2026, and that short-term signs of recovery could not be sustained. The limited improvement seen in the first months of 2026 gave way to a sharp decline again as of April. This volatile course reveals that the European economy is stuck between geopolitical risks and growth concerns rather than a chronic lack of confidence.

On the US side, although the picture looks stronger on the surface, sub-breakdowns point to similar caution. According to The Conference Board data, the consumer confidence index experienced a sharp drop at the beginning of 2026; although a partial recovery was seen afterwards, the expectations index in particular continued to remain below critical thresholds. This shows that the American consumer can manage today but looks at the future more cautiously.

To see the global framework more clearly, it is enough to look at the IMF's projections. It is emphasized that global growth will slow down in 2026, inflation will follow a volatile course, and downside risks will remain dominant. Geopolitical tensions, high indebtedness, and weakening policy space make it difficult for global confidence to recover permanently.

This picture tells us the following: The world economy is not fully relieved either. However, Turkey's situation diverges here. While the confidence problem in Europe is mostly related to external risks and low growth expectations, the issue in the US is the deterioration in expectations. In Turkey, there is a three-layered pressure at the same time: high price level, fragile expectations, and institutional trust debates. Therefore, Turkey is not just a part of the global wave; it appears as an economy that adds its own internal fragilities to that wave. This explains why consumer confidence is lower and more volatile compared to similar countries.

INFLATION, INTEREST RATES, UNEMPLOYMENT, AND GROWTH: The Four Main Determinants of Trust

Consumer confidence is not a variable that acts alone; it is in constant interaction with inflation, interest rates, unemployment, and growth. These four variables form the fundamental axis that shapes the household's economic perception.

The relationship between inflation and consumer confidence is the most direct one. High inflation does not only erode purchasing power; it also impairs the capacity to calculate for the future. The volatility of prices becomes more decisive than their level. People are bothered not by how expensive something is, but by not being able to predict what will happen tomorrow. This uncertainty is one of the strongest elements suppressing consumption. The fact that inflation in Turkey has entered a downward trend is technically a positive development; however, the fact that the price level is still high prevents a rapid recovery of confidence. Because for the consumer, the statement "inflation has fallen" does not mean "life has become cheaper." This gap explains why confidence reacts with a delay.

Interest rate policy creates a two-way effect on confidence. Tight monetary policy is necessary to keep inflation under control and anchor expectations. However, the same policy limits consumption by increasing credit costs in the short term. Demand is suppressed, especially in items such as housing, automobiles, and durable consumer goods. This brings consumer confidence to a paradoxical point: Steps taken to reduce inflation can pull confidence down in the short term.

On the unemployment and growth front, there is a finer distinction. The economy may grow, and the unemployment rate may remain relatively low; however, this does not automatically create an increase in confidence. Because consumer confidence is not only about the "probability of finding a job," but also about the "standard of living provided by the job found." If wages are eroding against inflation, growth figures do not produce meaning in the citizen's mind.

At this point, the critical concept is the "perception of real prosperity." If macro indicators are improving while the standard of living felt at the micro level is declining, consumer confidence continues to remain low. This is exactly the fundamental divergence observed in Turkey recently: while growth continues, the perception of prosperity remains weak. As a result, the combined effect of these four variables reveals that consumer confidence is not a technical reflection of economic reality, but a result of how that reality is experienced by households. It is difficult for confidence to rise permanently without inflation being brought under control, interest rate balance being normalized, employment quality being increased, and growth being transformed into prosperity.

ECONOMY OF EXPECTATIONS AND HOUSEHOLD BEHAVIORS: Decisions Are Made Not from Today, But from Tomorrow!

Economic decisions are often shaped not by current income, but by expectations about the future. For this reason, to understand consumer behavior, one must look not only at current conditions but at the perception of tomorrow. Consumer confidence becomes decisive at this very point: The spending decision is often made with the expectation in the mind before the money in the wallet.

In an environment of low confidence, the consumer does not give up spending entirely; they change the nature of the spending. They turn to essential needs, postpone large-scale purchases, shift to more affordable alternatives, and act more cautiously in credit usage. This is not a classic contraction reflex; it is a rational adaptation behavior developed against uncertainty.

Two main motivations stand out here. The first is the anxiety that "income will not be enough"; in this case, consumption is postponed and the tendency to save increases. The second is the expectation that "prices will increase even more"; in this case, consumption is brought forward. The volatile consumption behavior observed in Turkey in recent years is the result of these two motivations periodically prevailing over each other.

Precisely for this reason, while the market may appear vibrant in some periods, this vibrancy does not indicate a permanent increase in confidence. When brought-forward demand is confused with a real increase in prosperity, an analysis error becomes inevitable. The increase in spending does not always stem from optimism, but sometimes from necessity. From the perspective of behavioral economics, this situation is directly related to decision-making dynamics under uncertainty. Households tend to avoid risk in an unpredictable economic environment. This leads to short-term "getting by" behavior replacing long-term planning. Even if the economy is growing, individuals continue to limit their consumption decisions when they do not feel safe.

At this point, expectation management separates from the technical dimension of economic policies and turns directly into a matter of trust. Because people act not only according to the announced targets but according to their belief that those targets will be realized. If expectations are not anchored, even the most correct policy is not reflected in behaviors. As a result, consumer behavior shows us that the economy works not only with the balance of income and prices, but also with the balance of perception and expectations. In an environment where trust is weak, consumption is either postponed or necessarily brought forward; in both cases, a sustainable economic balance is not formed.

FROM THE PERSPECTIVE OF ECONOMISTS: Trust Is the Reality That Comes Before Numbers

Consumer confidence is not just a macroeconomic data point; it is also a reflection of economic thought and institutional structure. Therefore, understanding trust also means understanding the mentality that manages the economy.

The fundamental framework emphasized by Daron Acemoglu provides critical clarity here: Long-term prosperity is directly related to the quality of institutions. When the predictability and reliability of institutions weaken, social trust does not recover at the same speed even if economic indicators improve. In the case of Turkey, this institutional perception also plays an important role behind consumer confidence remaining stickily low.

Similarly, Refet Gürkaynak draws attention to the decisive role of expectation management in terms of monetary policy. According to him, the fundamental element in the fight against inflation is not only the interest rate level, but the extent to which expectations are anchored. When expectations are not brought under control, policy decisions produce delayed and limited effects. In this respect, consumer confidence is the social-level equivalent of expectations. The simple translation is this: saying "inflation will fall" to the market does not make inflation fall; it falls if households and firms believe it.

Mahfi Eğilmez, on the other hand, draws attention to the target-realization mismatch, emphasizing that one of the most important sources of loss of confidence in economic policies is the consistency problem. Constantly revised targets and forecasts far from realizations produce not only a technical deviation but also an erosion of trust.

Özgür Demirtaş points to a more behavioral point: Households read economic signals directly through the cost of living rather than official statements. Therefore, as the gap between expectation and reality grows, the effect of economic communication weakens. Economic reality is what is felt in the kitchen.

In the global literature, Paul Krugman's "sentiment economy" approach also offers a similar framework. Individuals' economic perception can often be more dominant than the picture presented by data. Especially the traces left by past crises maintain cautious behavior even in periods of recovery. The gap between the squeeze felt in Turkey and the announced data should be read within this framework.

Joseph Stiglitz emphasizes that trust is related not only to price stability but also to the perception of justice. As the deterioration in income distribution and inequality of opportunity increase, economic growth figures struggle to produce social trust. Because people evaluate not only the growth of the economy but also how much of a share they receive from that growth. If people do not believe that the rules of the game are fair and equitable, economic improvement does not easily turn into psychological trust.

Nouriel Roubini highlights the decisive effect of uncertainty on consumer behavior. According to him, the real fragility stems not from the current economic situation, but from the unpredictability of the future. In an economy like Turkey, where price volatility, geopolitical risks, and policy changes are frequent, this uncertainty effect is even greater. The only element that destroys trust is not inflation; it is not knowing where inflation will go tomorrow.

When all these approaches are evaluated together, the fundamental result that emerges is this: Consumer confidence is not just the sum of economic indicators; it is a combination of belief in institutions, consistency of policies, and predictability regarding the future.

STRUCTURAL PROBLEMS SPECIFIC TO TURKEY: Why Can't Trust Recover Permanently?

The reason why consumer confidence in Turkey has been moving in a low and fragile band for a long time is not cyclical fluctuations, but structural economic realities. Improvements seen in short-term data do not change this reality; they only delay its effect.

The first fundamental problem is the permanent memory created by the history of high inflation. The fact that inflation has entered a downward trend is not enough on its own; because households take as a reference not only today's rate but also the jump in the price level experienced in recent years. Once prices settle at a high level, the slowing in the rate of increase is slow to produce trust.

The second structural problem is the deterioration in income distribution. When the share that broad segments receive from growth remains limited, macroeconomic improvements do not find a response at the micro level. This causes the gap between growth and the perception of prosperity to widen. While the economy is growing, households may feel more squeezed.

The third element is the perception of price stability as fragile. In economies where exchange rate pass-through is high, the consumer questions not only the current price level but also how sustainable this level is. This produces constant caution in consumption decisions.

The fourth critical area is policy predictability. The perception that the speed of change in monetary and fiscal policies is high creates uncertainty in economic decision-making processes. This uncertainty is directly reflected in consumer confidence. Because trust depends not only on results but also on the consistency of the process.

In this framework, although the inflation and growth projections put forward by the IMF for Turkey technically point to a balancing process, they have not yet produced full conviction in terms of social perception. The decline of CPI to high single-digit or low double-digit levels does not create relief on its own due to the point the price level has reached. Therefore, the confidence problem in Turkey is not just a matter of economic performance; it is also a "matter of perception and experience." How the citizen experiences the economic system has become more decisive than official indicators. As a result, the structural picture shows that: Consumer confidence can be rebuilt not with short-term data improvements, but with long-term stability, income balance, and a predictable policy framework.

POLICY FRAMEWORK AND CONCLUSION: How Can Trust, the Compass of the Economy, Be Rebuilt?

Consumer confidence is not just an output of the economy; it is also a collective direction for the future. Although data in Turkey point to a limited improvement, this picture has not yet evolved into a permanent transformation of trust. Because the re-establishment of economic balances is not enough on its own; what is decisive is whether households have internalized this balance. In an economy where trust is weak, growth figures are read incompletely, the decline in inflation is perceived as fragile, and the sense of prosperity emerges with a delay. For this reason, the fundamental issue is not the direction of the numbers, but the extent to which society is convinced of those numbers. The ultimate truth in the economy does not change: Whatever the consumer believes in, the market will produce it after a while.

In this framework, the rebuilding of trust is the result of a holistic and consistent economic architecture, not individual policy steps. Because trust is formed not with fragmented improvements, but with a policy integrity that exhibits continuity.

The first condition is the continuity and predictability of the fight against inflation. It is decisive not only that inflation falls, but that the expectation that this decline is permanent is established. For households, the critical threshold is the formation of the belief that the price level has stabilized, rather than just the slowing of the rate of price increases.

The second element is the harmony between monetary and fiscal policies. Even if tight monetary policy produces disinflation on its own, permanent anchoring in expectations cannot be achieved unless it is supported by fiscal discipline. Consistency between policy components is the basis of trust production, beyond being a technical necessity.

The third area is the balancing role of income policies. In an environment where real wages cannot be protected against inflation, price stability alone does not produce a perception of prosperity. For this reason, the disinflation process must be carried out together with an income framework that makes the social cost manageable.

The fourth element is the balancing of financial conditions. While overly tight credit conditions keep inflation under control, they keep consumption under pressure for a long time. Although this produces technical success in the short term, it delays the recovery of confidence in the medium term. What is critical here is to establish a sustainable balance between price stability and economic vitality.

The fifth and most decisive dimension is institutional credibility and communication consistency. How this direction is explained and how predictable it is are as decisive as the direction of economic policies. Anchoring expectations is possible not only with a toolset, but with institutional trust.

When viewed within this integrity, the medium-term outlook indicates the following: If the disinflation process continues uninterrupted, the policy framework maintains its consistency, and a gradual improvement in real incomes is achieved, a limited but permanent recovery in consumer confidence is possible. However, this recovery does not happen by itself; it requires the simultaneous construction of time, stability, and trust.

Indeed, Acemoglu's emphasis on institutions, Gürkaynak's expectation anchor approach, Eğilmez's consistency criticism, and Demirtaş's expectation-based fragility detection unite at the same point: Trust is built not only with the interest rate level, but with a holistic credibility architecture.

In the final analysis, consumer confidence is the most sensitive thermometer of the economy; because it measures not only today but also the expectation for tomorrow. Although the Turkish economy produces signals of heading towards balance at the macro level, this improvement has not yet been fully reflected in the household's perception of daily life. The low band in the 2024–2025 period, the limited recovery at the beginning of 2026, and remaining far from the 100 threshold are the clearest indicators of this divergence.

The truly decisive question is no longer technical indicators, but daily life: Does the citizen wake up to the next day with less anxiety? Because ultimately, the market reflects what the consumer feels with a delay, but inevitably. And looking at the current picture, despite all the limited signs of recovery, the consumer is still cautious, still prudent.

For this reason, the fundamental truth does not change: In the economy, numbers show the direction, but what determines the direction is what people believe in. Without trust being established, growth does not become permanent, consumption does not become balanced, and prosperity does not become sustainable.