Industrial confidence up again despite euro

The Federation of the Thai Industries (FTI) reported yesterday that the Industrial Sentiment Index in May rose for the sixth consecutive month, from 104 in April to 106 points. The higher the score over the 100-point baseline, the more optimistic are respondents on average.

Positive factors attributed for rising confidence included higher domestic growth, rising demand among domestic consumers, and the resumption of normal operations by the industrial sector after last year’s flood disaster.

FTI chairman Payungsak Chartsutipol said enterprises were now higher concerned over the financial crunch in the euro zone, not only in the Greek economy, but also its possible spread to Italy. Such contagion would have an impact on other economic giants including Germany and France, which are creditors for heavily indebted nations.

"The euro crisis could spread to other countries and affect Thai export and manufacturing growth," said Payungsak, adding that this year’s target for 15-per-cent export growth might not be achieved easily.

The federation’s survey on industrial sentiment showed that orders from overseas had dropped last month compared with April.

Confidence in the manufacturing sector for the next three months dropped from 112.6 points in April to 111.1 points in May. This was because of lower orders from overseas and higher production costs.

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However, Payungsak still believes that the impact on exports will be limited, as Thailand relies more on exports to emerging economies. Only some industrial sectors would be affected by a major European downturn, mainly jewellery and ornaments, rubber and vehicles. However, shipment of foods, one of Thailand’s major exports, would still increase.

FTI spokesman Surapong Paisitpattanapong said that industries were more worried about political conflict, so the government should make urgent efforts to increase confidence in political stability.

Confidence would also be boosted by a delay in the government’s programme to improve labourers’ incomes to a minimum of Bt300 per day. Already in effect in some provinces, the new minimum is to be imposed nationwide early next year, but industrialists want it to be delayed for a few more years. They note that this would lower costs for small and medium-sized enterprises, which have not benefited from the cut in corporate tax, and claim this would stimulate domestic consumption.

The FTI also reported that car production had exceeded 200,000 units in May, the highest in 50 years of automotive manufacturing in the Kingdom. This ensured that Thailand would produce 2.2 million vehicles this year. Of these, 1 million cars would be for export and the rest for domestic supply.

Car production in May surged to 202,834 units, up by 105.29 per cent year on year, as every carmaker is back to normal operation now, said FTI Automotive Industry Club chairman Suparat Sirisuwanangkura.

The country’s automobile production from January through May totalled 844,031 units, a 28.48-per-cent increase year on year.

Meanwhile, domestic car sales in May also climbed significantly, by 107.6 per cent from the same month last year, to 115,943 units.

The club projected that automobile production from June to August would reach 582,074 units, increasing by 28.19 per cent from the same period last year.