Lower consumer confidence to slow GDP growth, UTCC warns

The University of the Thai Chamber of Commerce’s monthly survey indicated yesterday that consumer confidence retreated to its lowest position in half a year because of many negative factors. The key factors are concern over rising fuel prices, delay of the Bt350-billion water-management project, and slowing domestic and global economic growth.

Last month, the UTCC’s Consumer Confidence Index fell for the third consecutive month from 82.5 points in May to 81.6 points. All sub-indices related to consumer confidence also dropped to the lowest figures in six months.

“Falling consumer confidence signalled that the Thai economy would grow slowly because of lower spending,” said Thanavath Phonvichai, director of the UTCC’s Economic and Business Forecasting Centre. “Amid many negative factors and no positive signs to help boost confidence, the index continuously trended downwards in the third quarter of the year. This will result in lower expansion of the Kingdom’s gross domestic product.”

Index scores below 100 indicate negative confidence.

People now feel reluctant to spend or invest their money, he said. More than half of the 2,242 respondents to the survey said it was not a suitable time to purchase a car or house, to travel, or to start a new business.

To boost consumer confidence, Thanavath suggested the government urgently come up with a clear plan to manage fuel prices amid rising energy costs that affect the cost of living. It should also stimulate budget disbursement, particularly on infrastructure development, as the projects will promote cash flow. It should also promote tourism from overseas, as this seems to be the key sector that could support the economy as export growth drops.

 

Negative factors 

 

Negative factors both at home and abroad have been on the rise. Domestically, the Fiscal Policy Office cut its estimate of GDP growth this year to 4.5 per cent from 5.3 per cent. The Central Administrative Court put off the Bt350-billion water-management scheme, ordering the government conduct public hearings and prepare environmental impact assessments. 

Consumers perceived that the cost of living was increasing sharply in contrast with their incomes. The political uncertainty and unrest in the South also made people anxious.

Moreover, consumers worried over global economic growth given rising tension on the European Union’s financial crunch and the scaling down of the United States’ quantitative-easing scheme.

Thanavath said that as consumers spent less because of weak confidence in the economy, Thailand would see a drop in inflation in the remaining months. However, the country is not yet threatened with deflation as spending has continued to grow, albeit more slowly. Consumers felt goods prices and living costs had increased. Thus, they would limit their spending.

The UTCC survey found confidence in the overall economy dipped from 72.8 points in May to 71.8 points last month. Confidence in future income plunged from 100.4 to 99.3, the first time this index fell below 100.