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Thai factory output falls as external demand worsens

Monday, February 29, 2016 - 12:27

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Thailand's industrial output fell more than expected in January and at the sharpest pace in more than a year, showing the trade-reliant economy continues to struggle amid weak global and domestic demand.

[BANGKOK] Thailand's industrial output fell more than expected in January and at the sharpest pace in more than a year, showing the trade-reliant economy continues to struggle amid weak global and domestic demand.

Stubbornly weak exports and domestic spending have been a big drag on Southeast Asia's second-largest economy. The ruling junta has struggled to revive demand since seizing power in May 2014.

The Industry Ministry said on Monday its manufacturing production index (MPI) in January contracted 3.3 per cent from a year earlier after December's revised 1.4 per cent gain. A Reuters poll predicted a 0.2 per cent drop.

Falling commodity prices and drought have also hit the farm sector. While government spending and tourism are picking up, some big public infrastructure projects have yet to get started. "The weak external environment is expected to remain as one of Thailand's key drags to economic growth," said Barnabas Gan, an economist at OCBC in Singapore. "The weak manufacturing print serves to reinforce this expectation, given that industrials react to the lower export prints." However, a recent pickup in consumption means Gan expects the Bank of Thailand to keep its interest rates unchanged at its next policy meeting in March.

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January's decline in output was led by lower production of autos, electronics, steel and apparel. Car production slipped 11.7 per cent in January from a year earlier but car exports rose 1.4 per cent.

The auto sector accounts for about 10 per cent of gross domestic product. Thailand is a regional manufacturing and export hub for global automakers and major makers of hard drives.

Factory output has been weak for more than two years. Industrial goods account for nearly 80 per cent of total exports, which tumbled 8.9 per cent in January from a year earlier, the fastest pace of decline in more than four years.

Capacity utilisation in January rose slightly to 63.93 per cent from 62.89 per cent in December.

REUTERS

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