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Fri, April 13, 2007 : Last updated 20:32 pm (Thai local time)

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Home > Business > Consumer confidence at lowest level for five years

Consumer confidence at lowest level for five years

The Consumer Confidence Index dropped to its lowest level in five years last month, mainly because of the country's uncertain political outlook and renewed rises in oil prices, the University of the Thai Chamber of Commerce revealed yesterday.

The university's vice president for its Research Division, Saowanee Thairungroj, also noted that the Bank of Thailand's decision to slash 50 basis points off its policy interest rate on Wednesday would result in a slight increase in consumer spending in the third quarter.

The reduction will cause a fall in market interest rates of about 25 basis points, perhaps bringing an end to stalled consumer and investor spending on property market products. However, to aggressively stimulate consumer spending and investment, the central bank should consider cutting its policy interest rate by a further 25 basis points, she said.

More than 50 per cent of respondents in the centre's survey said that now was not a suitable time to invest, travel, purchase new cars or buy new houses.

The survey also found that the index for gross domestic happiness of consumers continued its fall last month, due to concerns about the rising cost of living and political instability.

The so-called happiness index slumped from 99.5 points in February to 98.3 points last month. Confidence in the political situation fell to 43.5 in March, from 44.8 points in February.

The Consumer Confidence Index declined to 78.5 points - the lowest level since 2002 - compared with 79 points in February.

Other indexes related to consumer confidence also shrank in March to record low levels.

Based on a survey of 2,243 respondents, confidence in the overall economy decreased considerably from 73.4 in February to 72.8 points last month. A level below 100 points indicates economic pessimism.

Confidence in future income fell from 89.2 to 88.6 points in March, while the index on future employment opportunities dropped from 74.4 to 74.

As well as the political situation and global oil prices, other negative factors affecting consumer confidence included a Bt1.20-per-litre increase in domestic retail oil prices, a fall of 3.42 points in the stock exchange index, serious conflict in the deep South and concern over appreciation of the baht.

The university's Economic and Business Forecasting Centre predicted further declines in the indexes during the first half of the year, because volatile factors will continue to affect consumer confidence.

Saowanee said consumer confidence should recover late in the third quarter, provided there are no further negative factors.

Volatile factors should be eliminated as soon as possible, particularly political uncertainty, she added.

In order to encourage economic growth and raise consumer confidence, Saowanee suggested the government distribute financial assistance to people on low incomes, particularly farmers, who constitute the majority of the population.

The government needs to help develop irrigation systems as well as increasing farmers' incomes in the face of decreasing prices for agricultural goods. Moreover, it should consider placing budget disbursements for mega-projects on a fast track to stimulate overall economic growth, she said.

Petchanet Pratruangkrai

The Nation

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