July Economic Indicators: Global Economic Deceleration Affecting Exports and Manufacturing Production (Business Brief No.3339 Full Ed.)

The Thai economy was boosted in July by private consumption (with 7.0-percent growth YoY in July, beating the 4.4-percent growth YoY in June) and investment (with 19.5-percent growth YoY in July, beating the 19.0-percent growth YoY in June), thanks to government stimuli. However, risks from the Euro crisis and economic deceleration of China (a key economy and our most significant importer) resulted in deeper contraction in export sector with a 3.9-percent contraction YoY in July, continuing from the 2.3 percent contraction YoY in June, and manufacturing production reporting a 5.8 percent contraction YoY in July, after the 9.6 percent contraction YoY in June.

Regarding the Thai economic outlook for 3Q12, KResearch expects that economic momentum, based on the seasonally-adjusted GDP for 3Q12, may barely change from 2Q12, reflecting stagnation in economic activity amid slower domestic spending, plus an sluggish global economy as a result of the Euro crisis and Chinese economic deceleration that are impacting many regions.

Although manufacturing production at formerly inundated plants will continue to improve, economic downturn globally may delay the recovery of the Thai manufacturing sector and exports until late 3Q12. Such negative situation, coupled with a surge in some energy prices domestically and higher base in 3Q11, KResearch expects that the Thai GDP in 3Q12 may hover at a rate not exceeding 4.0 percent YoY, against the 4.2-percent growth in 2Q12. The 3Q12 could be a critical period for the Thai and overseas economies as we have to brace for the more extensive and drastic impacts of the Euro crisis.