Rising concern about the New Year's Eve bomb blasts and the strengthening of the baht caused consumer confidence in January to drop to its lowest level in five months, according to a survey by the University of the Thai Chamber of Commerce released yesterday.

The outlook has also been worsened by the unclear direction of economic policies and the government's decision to amend the Foreign Business Act, both of which have affected the confidence of foreign investors.

The Consumer Confidence Index dropped to 79.9 points last month, from 82.4 in December. The figure has now been below 100 points for 33 consecutive months, showing weak consumer confidence.

Other indexes reflecting consumer confidence also fell last month to their lowest points in five months.

Confidence in the overall economy decreased from 76.5 points in December to 74.2 points last month.

Confidence in future income fell from 93.2 in December to 90.2 points, while the index on future employment opportunities dropped slightly from 77.4 in December to 75.4 last month.

The January index was based on a survey of 2,245 respondents.

Thanawat Ponvichai, director of the university's Business and Economic Forecasting Centre, said the decrease in consumer confidence implied a risk for economic growth, as consumers are now more conscious about their spending.

However, the university said it was too early to determine whether the fall in consumer confidence would be permanent.

"February's index will be a key indicator as to whether consumer confidence is on a downward trend. If the index also drops from January, it could possibly drop to its lowest level in five years over the following months," he said.

Negative factors that would cause a further drop in consumer confidence are a reoccurrence

of the bomb blasts, oil prices rising above US$60 (Bt2,146) per barrel, and more unclear economic policies issued by the government.

Last August's index showed consumer confidence at its lowest point in five years. But the index recovered after the September 19 military coup.

To boost consumer confidence, Thanawat suggested the government accelerate budget disbursement in the second quarter, decrease the policy interest rate by between 75 basis points and a full percentage point in the first half, and proceed with mega-infrastructure projects.

A decreasing policy rate will facilitate business expansion and increase consumer spending, he added.

Wachira Khuntaweetep, a lecturer at the centre, said the loss of consumer confidence was also reflected in a decline in car and house purchases, travel, and expansion plans by small and medium-sized enterprises.

Meanwhile, the Economic and Business Forecast Centre's survey found that its index for gross domestic happiness of consumers decreased last month, mainly because people are concerned about the rising cost of living and uncertain politics.

Confidence in the cost of living fell from 60.2 points in December to 59.1 in January, and confidence in the political situation dropped to 47.1 points, from 48.6 points in December.

Fifty per cent of respondents said political uncertainty was their first concern. Rising oil prices came second.

Petchanet Pratruangkrai

The Nation