Consumer confidence reaches its highest level in 19 months

Index rises for fifth time, but risks remain

Consumer confidence last month reached its highest level in 19 months, driven mainly by economic expansion, fiscal stimulus and higher purchasing power, according to the Centre for Economic and Business Forecasting (CEBF).

However, it warned that global uncertainties, the appreciating baht and the domestic political situation were risks to Thai economic growth.

The Consumer Confidence Index rose to 74.3 in February from 72.1 in the previous month, according to the CEBF. It was the fifth consecutive rise, though still below the 100 benchmark for positive confidence.

CEBF director Thanawat Pholwichai said consumers had higher expectations of continued economic growth along with low inflationary pressure after the record 18.9-per-cent year-on-year expansion in gross domestic product in the fourth quarter of 2012, no sign of asset bubbles, and sharp rises in the SET Index.

Export recovery, foreign-capital inflows, a rise in the minimum daily wage across the country and fiscal stimulus also drove up consumer confidence.

"The higher minimum wage has been in effect for more than two months without many lay-offs, resulting in workers gaining confidence in their spending and bargaining power. The government's large projects continue injecting money into the system, giving people confidence that state expenditures will stimulate the economy for several years," Thanawat said.

However, GDP growth and consumer confidence could be undermined by three factors: fragile foreign economies, appreciation of the baht against other currencies, and local political situations.

Although the US and European economies have shown signs of recovery, global investors remain concerned over the cessation of the United States' quantitative-easing measure, as well as growing resistance in several European countries against austerity policies.

The baht's appreciation could adversely affect Thai exports, tourism and the overall economy, Thanawat said. Likely conflicts over amending the Constitution and the unresolved territorial dispute with neighbouring Cambodia could be issues of concern.

He expects no impact on the overall economy from Myanmar's temporary suspension of natural-gas distribution, which may cause a power crisis, as the private sector is fully able to cope with a power shortfall.

He urged the government to pay attention to the instability of power production and distribution, as that could undermine the confidence of foreign investors, particularly those in high-technology industries.

Meanwhile the newly established Gold Research Centre yesterday launched the Gold Price Sentiment Index, indicating the attitudes of traders and other players to gold investment.

"The Gold Price Sentiment Index remains 44.07 in March," said Kamonthan Pornpaisarnvijit, the centre's director. "This is not high because of declining gold prices from speculation, the baht's appreciation and the movement of the US dollar.

"The three-month index is 75.72 as groups of big investors hold gold and small investors accumulate gold. This year's gold price is expected to stay in a range of US$1,750-$1,800 an ounce. The retail price of domestic gold is estimated in a range of Bt23,500-Bt25,000 per baht weight."

The Gold Research Centre, established by the University of the Thai Chamber of Commerce, The Jewellers Association and GT Wealth Management for analysing gold prices, will launch a "Gold Trade Consensus", a majority view of traders for gold prices, next month.

Ekachai Apisakkul, dean of the faculty of business administration at UTCC, said the gold price was expected to be positive in the next three months on speculation, the baht's appreciation, US dollar movement and the European sovereign debt problems.

Gold Traders Association president Jitti Tangsithpakdi expects to see volatility in the gold price this year, estimating a low of $1,500 an ounce and a maximum of $1,900 (Bt21,500-Bt26,500 per baht weight).