Negative factors persist as consumer confidence falls further

"Many negative factors crimped consumer confidence in the economic expansion, both internal and external. It seems consumer sentiment will continue to deflate in the following months as there are no positive factors to blow it up," Thanavath Phonvichai, director of the university’s Economic and Business Forecasting Centre, said yesterday.

Concerns are focused on the drought, global economic sluggishness after Greece defaulted and labour issues in the fishing industry.

With consumer confidence continuing to weaken, the economy has a high possibility of growing slower than the projection of 3-3.5 per cent, averaging 3.2 per cent, this year.

Consumer confidence has been in free fall for half a year due to the plunge in crop prices, contraction in exports and slowdown in economic growth as well as the bad news about the drought, Greece’s woes and the mess in the fishing business.

The centre’s preliminary estimate of the damage to the economy from the drought is 0.1 percentage point. Exports would shrink by 1-2 per cent this year.

The consumer confidence index slipped to 74.4 points in June from 75.6 in May. A score below 100 indicates low confidence.

Last month, other indices reflecting consumer confidence also continued dropping, including future incomes to 90 points and employment opportunities to 69.4 points.

Based on the nationwide survey with 2,241 respondents, people also had reservations about spending their money on a new car, house or travel, or to start a new investment.

Consumer confidence to purchase durable goods and travel also dived to a one-year low.

Thanavath said the government could do nothing much to boost confidence since most factors are uncontrollable.

However, some measures could be taken to solve domestic problems such as relaxing fishing boat registration by some period. The docking of trawlers could in the short run drive up the domestic price of seafood.

To speed up growth, the government should solve the problem in the fishing industry in a short period, as well as continue to help people suffering from the drought, particularly those in the Central region.

Last month’s erosion in consumer confidence was attributed to the Bank of Thailand’s decision to cut its forecast for this year’s economic growth from 3.8 per cent to 3 per cent.

Exports in May were 5 per cent short of the same month last year. Crop prices remained low while worries worsened about the drought.

Consumers also expressed concern about global economic conditions and the high cost of living.