Consumer confidence sinks
The GLOOMY economic outlook, uncertain future incomes and high costs beat consumer confidence to a 10-month low in April, with the downtrend expected to continue in the following months.
According to a nationwide survey by the University of the Thai Chamber of Commerce, the Consumer Confidence Index slid from 77.7 points in March to 76.6 in April. A reading below 100 points reflects poor sentiment.
This could be more bad news for the retail sector, as consumers believe it is not a suitable time to spend a lot, like to buy a new car or house, start a new investment or take a trip.
"People are greatly concerned about their incomes, as the economic outlook is not good," Thanavath Phonvichai, director of the university’s Economic and Business Forecasting Centre, said yesterday.
"As this is the back-to-school season, people are also really worried about their high cost burdens and will be more careful with their spending. The continuing low prices of agricultural products have also damaged consumer confidence," he said.
Policy rate cut good news
With low spending power but high cost burdens, people, especially parents, will turn to pawnshops and underground loans more this month to top up their liquidity.
The Fiscal Policy Office has downgraded this year’s economic-growth forecast from 3.9 per cent to 3.7 per cent. Exports in March contracted 4.45 per cent from the same month last year. Crop prices remained low.
Consumers also expressed concerns about the cost of living, domestic prices of petroleum products and global economic conditions.
The positive factors cited in this survey were the Bank of Thailand’s cutting of the policy interest rate by 25 basis points to 1.50 per cent and the Stock Exchange of Thailand’s rising index.
Lower interest rates should help weaken the baht to 33-33.5 against the US dollar, which will help the export sector’s price competitiveness.
The university forecasts that gross domestic product will grow in the range of 3-3.5 per cent this year. Based on that projection, exports are expected to pick up by only 0.4 per cent, which is much lower than the Commerce Ministry’s target of 1.2 per cent.
Inflation is also expected to remain mild at 0.5 per cent this year because of shrinking spending, while energy prices are still a bargain.
In the worst-case scenario, GDP could grow by less than 3 per cent this year if exports and the global economy do not recover as hoped.
To shore up consumer confidence, the government should accelerate its infrastructure investment and trim the benchmark interest rate by 25 more basis points next month, Thanavath said.
Wachira Kuntaweethep, assistant director of the centre, said that based on the 2,241 responses to the survey last month, other indices reflecting consumer confidence also continued dropping, including future incomes to 92.7 and employment opportunities to 71.2.
In April, consumer confidence to buy a new car or new house, travel and invest also declined for the fourth straight month.
