Industry sentiment drops to 5 month low

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Thailand’s industry sentiment dropped to a five-month low in April, due to rising production costs and lower domestic demand, the Federation of Thai Industries (FTI) said on Wednesday.

“The factors that negatively impacted the confidence of operators within the industrial sector was rising production costs including raw material, energy and logistics,” said Kriengkrai Thiennukul, the newly elected chairman of the FTI. 

“Domestic purchasing power is also slowing down from inflation and high household debt, making people more wary of spending and contributing to the drop in domestic demand. 

The FTI said its industry sentiment index dropped from 89.2 points, the highest in 25 months, in March to 86.2 in April, the lowest since December.

Kriengkrai said that the war in Ukraine is worsening rising energy prices in Thailand, contributing to inflation and rising logistic costs. In terms of exports, he added that the conflict is also exasperating the global economic recovery.

He noted that the war is contributing to rising import prices of raw materials for animal feedings, fertilizer, and metal products, among others he noted. A shortage of shipping containers started last year is still unresolved.

On top of this, the Thai baht is at its lowest in five years. Although the decline helps exporters, there’s a growing concern of rising import costs for manufacturers, especially for oil products. The currency was trading at 34.61 baht per dollar on Wednesday morning.

The FTI’s forward looking index of industry sentiment over the next three months also dropped from 99.6 points in March down to 95.9 points in April, mainly due to concerns over rising oil prices.

The cabinet on Tuesday approved the measure to extend a cut on diesel excise tax of 5 baht per litre for another two months, between May 21 and July 20. The measure is expected to keep local diesel prices below 32 baht per litre for a month or two, after the government decided to lift the 30-baht cap on the price last month.

Diesel prices are expected to eventually rise to 35 baht per litre, with the FTI continuing to urge the government to keep the price below 35 baht per litre for another three months. The FTI is also urging the government to come up with more stimulus measures to increase domestic demand and tourism.

The headline consumer price index was at 4.65 per cent year-on-year in April, following a 13-year high jump of 5.73 per cent in March, according to the commerce ministry’s data.

Household debt reached 14.35 trillion baht in the third quarter of 2021, equivalent to 89.3 per cent of the gross domestic product, according to the National Economic and Social Development Council’s data.

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