STATE OF THE ECONOMY
Survey confirms deepening gloom
May consumer confidence at lowest point in 4 years - UTCC
Consumers and business leaders alike are showing lower confidence in the economic outlook, due to persisting worries over escalating oil prices, higher interest rates, political uncertainty and the appreciation of the baht against the US dollar.
According to the University of the Thai Chamber of Commerce (UTCC), the consumer confidence index in May dropped to its lowest level in 49 months.
As if to confirm the pessimism, the Industry Ministry yesterday revised its forecast for growth in the manufacturing sector downwards from 8 per cent to 6 per cent.
The ministry's permanent secretary Chakramon Phasukavanich said the fall was due to higher oil prices, higher interest rates and political uncertainty.
Confidence has also plunged among private transport operators, shown by a drop in the number of new commercial vehicles registered in April.
The Land Transport Department said that in April, 21,903 passenger cars were registered, up 2.19 per cent on figures for April last year. But only 182 buses and 2,363 trucks were registered, down 57.48 per cent and 42.28 per cent, respectively.
"Commercial vehicle registration dropped remarkably, due to soaring oil prices and political uncertainties, which have a psychological impact on local business operators," said the department's director general, Piyaphan Champasut.
In the first four months of the year, registrations of new motorcycles, passenger cars and pickups increased, but the number of new buses and trucks dropped by more than 40 per cent year on year.
The key state agencies - the Bank of Thailand, Finance Ministry and the National Economic and Social Development Board - have all lowered their projections for economic growth this year due to a sharp reduction in both government and private investment.
Exacerbating the gloom, the Bank of Thailand raised its policy interest rate again this week by 25 basis points to 5 per cent.
The director of UTCC's Economic and Business Forecast Centre, Thanawat Polvichai, said declining consumer confidence would have a lingering effect on the economy until the end of this year.
The university's Consumer Confidence Index fell to 81.5 points in May, its lowest level in 49 months, after standing at 82.5 points in April.
The index is derived from a survey of 2,244 respondents. When it is below 100 points, it suggests pessimism about economic prospects. Other indices reflecting consumer confidence, calculated at the same time as the main index, also fell to their lowest points in many months.
Thanawat said the figures indicate that consumers expect the country's economic outlook to deteriorate until the fourth quarter of this year.
"After the election in October and the formation of a new government, consumer confidence should recover," he said.
The employment confidence index last month stood at 92.6 points, a fall from last month's 93.6 points and the lowest figure in four years.
Thanawat said the chamber of commerce might lower its estimate for this year's economic growth early next month. At present it forecasts growth of 4 per cent to 4.5 per cent. The main factors behind the possible adjustment are soaring oil prices and the stronger baht.
Of those questioned in the consumer confidence survey, 32.7 per cent said the economy would continue to fall and 61.9 per cent said economic figures would remain unchanged. Only 5.4 per cent said the economic situation would improve in the next six months.
Dwindling consumer confidence will lower investment, business expansion and consumption, as well as reducing consumers' purchasing power, Thanawat said.
The battered state of consumer confidence is also reflected in declining sales of cars, luxury goods and properties this year and plans for travel are falling month by month.
Forty-two per cent of respondents in the consumer survey said now was not a suitable time for investing in new small and medium-sized enterprises, while another 34 per cent claimed to be hesitant about new investments.
Thanawat said consumers have also lost confidence in a comfortable cost of living, while confidence in the political situation has fallen to 24.4 points, the lowest of all the indices.
Of the negative factors affecting the economy, oil prices carry the heaviest weight in the minds of consumers, followed by the political situation.