Thailand: Domestic Demand Continues to Soften

Consensus Forecasts

Latest monthly data underscores a further slowdown in domestic activity, although the outlook for the external sector appears to have improved thanks to a recovery in exports. On the domestic front, weakening activity has been reflected in total private consumption growth easing to 1.4% (y-o-y) in March, down from the already soft gain of 3.3% in February and a peak of 11.4% in November. In addition, private investment growth eased sharply from 9.0% in February to 3.4% in the same month. The slowdown was driven by a further contraction in capital goods imports, along with a moderation seen in both domestic commercial car sales and domestic cement sales. In contrast to slowing domestic activity, recent data for the external sector has appeared more encouraging. March’s trade report showed exports advancing by 4.2% (y-o-y), partly reversing February’s 4.6% contraction. The rebound in overseas shipments was largely broad based, led by firm gains in manufactured exports and agricultural products. Imports, however, posted a 12.5% (y-o-y) contraction in the same period. This followed on from a 3.7% increase in February, and came amid weaker demand for oil, non-oil and raw materials. Furthermore, imports for consumer and intermediate goods also weakened. As a result of the rebound in exports and the sharp drop in imports, the trade surplus rose from US$0.6bn in February to US$2.0bn in March.

Meanwhile, consumer prices continued to trend lower after April’s headline figure came in at 2.42% (y-o-y), down from 2.69% in March and February’s 3.23% increase. Although prices for food rose, non-food inflation came in lower, which contributed to overall disinflation.

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