Confidence hits a new low

Thailand's leading indexes on business and industrial confidence have dropped to their lowest levels in several years due to increased concern over oil prices and political conflict.

The Bank of Thailand's latest Business Confidence Index (BCI) shows confidence about the next three months has dropped to the lowest level in nearly seven years, while confidence over both private consumption and investment also declined significantly.

The BCI fell to 44.4 in May, the latest month for which data are available. This is the lowest level since September 2001.

Meanwhile, the Federation of Thai Industries' (FTI) Manufacturers' Confidence Index for May plunged to 71.4, the lowest since the FTI started its monthly survey in 2002.

In the previous month, both the central bank's and the FTI's key indicators were better, at 49.9 and 78.8, respectively.

According to Amara Sriphayak, the Bank of Thailand's senior director, private consumption and investment grew year on year at a slower pace in May, while exports continued to expand.

The Private Consumption Index rose 6.3 per cent year on year, but this was down from the 7.9-per-cent level in April. It was also down 1.9 per cent from the previous month, which saw 2.2-per-cent growth.

"The month-on-month contraction [in private consumption] was related to worsening consumer confidence, as caused by the unrelenting rise in oil prices and political uncertainty," she said.

As for private investment, the index rose 5 per cent year on year, compared with 5.4-per-cent growth in April. The index also dropped 0.7 per cent from the previous month.

"This index has fallen gradually due to a continuing decline of business confidence," Amara said.

Imports of capital goods also dropped as investors postponed investment plans amid rising production costs and political uncertainty.

In the FTI's survey for May, 25 industries - including chemicals, cement, steel, wood, gems and jewellery, automobile, textile, and energy - showed lower confidence. The alternative-energy sector was the only one described as highly confident.

"Although most manufacturers have improved their productivity and reduced energy costs, they still cannot cope with the rise in overall production costs. Hence, the government should allow prices to rise to reflect production costs," FTI vice chairman Adisak Rohitasune said.

FTI chairman Santi Vilassakdanont said: "If the government cannot curb inflation while launching mega-investment projects, the economy will slow down in the second half of the year."

Surapong Paisitpatnapong, spokesman for the FTI's Automotive Industry Club, said vehicle production for the domestic market was likely to be only 650,000 units, down from the previous target of 680,000.