Consumer sentiment rises again despite concern

The index in April rose for the fifth straight month to 77.6 points, compared with 76.6 in March. However, the confidence index on the cost of living dropped to the lowest level in 21 months, since July 2010, to 50.7 points. That is down from 52.4 points in March.

A score below 100 indicates weak consumer confidence.

The overall improvement in the CCI last month was attributed mainly to the increase in to minimum wage to Bt300 in seven provinces that took effect on April 1, and a surge in spending during the Songkran festival.

"Although consumers’ sentiment has recovered continuously as they foresee more political stability and stronger economic growth this year, people are highly worried about the skyrocketing cost of living and expensive goods. This could lead to deflation in the future," said Thanavath Phonvichai, director of the UTCC’s Economic and Business Forecasting Centre.

Thanavath explained that consumers feel their rising incomes will not be sufficient to cover the soaring cost of living.

The survey polled 2,255 respondents, more than 50 per cent of whom expressed their highest concern over rocketing goods prices. They feel that rising prices have seriously reduced their purchasing power. The confidence index on future cost of living (in the next three months) also dropped from 72.9 points in March to 70.5 points in April.

Thanavath urged the government to consider carefully the slowdown in inflation, which dropped to 2.47 per cent year on year in April. He explained that the low figure might have resulted from the recovery of manufacturing after the flood disaster. But it could also be a sign of consumers fearing their loss of purchasing power and being reluctant to spend because of higher prices.

At the same time, inflationary pressure remains, including from rising fuel prices, which have a direct impact on the daily cost of living. Inflation could exceed 4 per cent this year given an increase in the excise tax on diesel by Bt5 per litre, Thanavath noted.

He added that although a number of consumers are pleased that |they have higher incomes under the wage-increase policy, they are concerned about job security, as employers could easily lay people off to shield themselves from the rising cost of production.

Vichai Assarasakorn, secretary-general of the Thai Chamber of Commerce, said producers would soon need to increase prices amid rising costs of labour, raw materials and fuel. He said consumers would have to brace for higher prices, as producers would not be able to absorb rising costs in the long run.

The UTCC survey also produced other indices showing increased consumer confidence last month. Confidence in future income grew from 95.9 points in March to 97.1. The index on future employment opportunities rose from 67.4 points to 68.2.

The confidence index on new-car purchases grew beyond the 100-point level for the first time in seven months, to 101.1.