Retail Sentiment Index hits lowest level in 15 months amid low purchasing power

The Retailers Association of Thailand and the Bank of Thailand on Thursday revealed the results of the survey for the second quarter of this year. The factors contributing to the decline included concerns over the delayed government formation, high cost of living, and sluggish economic conditions.

According to Thai Retailers Association vice chairman Chatchai Tuongratanaphan, the overall RSI index for the second quarter of this year has raised concerns as it has fallen below the average compared to the previous quarter. This points to a decline in sentiment across all components.

Various indicators, such as same store sales growth quarter on quarter, spending per bill, or per basket size, and frequency of shopping reflect weak consumer purchasing power. The increased burden of the cost of living, public utilities, and transportation expenses have pressured consumers to focus on essential purchases. Additionally, there are no new government stimulus measures to boost spending, Chatchai said.

The declining regional indices indicate that businesses have yet to recover fully, despite the arrival of around 12.4 million international tourists in the first half of the year. Moreover, when categorising businesses, the current sentiment has declined across all types of stores, particularly wholesale stores and hypermarkets. The exception includes supermarkets and convenience stores, as consumers continue to prioritise necessary consumer goods and take advantage of promotional offers to reduce daily living expenses, Chatchai added.

The survey on the recovery of retail businesses was carried out from June 19-26, covering various topics:

1. How business operators will adapt in case of a hike in minimum wage:

- 63% of business operators will turn to more hiring of temporary staff

- 61% will enhance employees' job skills and increase responsibilities

- 59% will try to reduce non-labour costs

- 48% will raise prices of products / services

- 22% will delay investment plans

- 22% will use machinery to replace labour when possible

- 15% will consolidate benefits with wages

- 13% will reduce employment of some staffs

2. Measures business operators would take in case of minimum wage increase:

- 78% of business operators want supportive tax measures, such as reduction in corporate taxes, or increase in tax deduction for expenses

- 63% would like to see a gradual step-by-step increase in the minimum wage

- 59% would welcome lower public utility costs (water and electricity)

3. Projections for price adjustments in the next 3 months:

- 48% of business operators will adjust products / service prices, but not exceeding 5%

- 22% will not adjust product prices

- 17% will increase product prices by 6-10%

- 9% will increase product prices by 11-15%

However, the overall Thai retail industry in the first half of this year is still not as positive as expected due to high costs from energy, public utilities, and others, while consumer purchasing power remains weak.

Therefore, the Thai Retailers Association is offering the following suggestions:

1. Support the swift and smooth formation of a new government to lead the nation forward.

2. Allocate state budget expenditures with targeted economic stimulus measures for different groups, avoiding redundancy.

3. Increase purchasing power for grassroots groups and increase spending in high-purchasing power groups, while simplifying access processes.

4. Promote domestic tourism to attract foreign tourists and Thai travellers, such as extending the visa on arrival period for foreigners staying in Thailand, increasing flight frequencies to Thailand, and building confidence in safety when visiting Thailand.

The Thai Retailers Association said it would urge the new government to implement economic policies and measures that would restore confidence among business owners and stimulate consumer purchasing power. The association is ready and determined to collaborate with all sectors to drive the Thai economy forward with determination and strength, Chatchai said.