Consumer confidence up but fragile

Rising cost of living and political instability, especially Article 112 amendment issue, could easily hurt sentiment

Although it edged up last month, consumer confidence could easily be damaged by three challenges: the rising cost of living, the price of fuel, and political instability, especially surrounding calls to amend Article 112 of the Constitution, the basis for lese majeste law.

Results of a survey by the University of the Thai Chamber of Commerce (UTCC) released yesterday showed that the Consumer Confidence Index (CCI) in January rose for the second straight month, from 73.1 points in December to 74.2. The rising index was attributed to the financial support by the government and financial institutions for flood relief, lower interest rates, increasing salaries of government officials with university degrees, and a positive outlook for this year's economic growth.

However, the rising oil price and cost of living were negative factors. Consumer confidence is very fragile and could easily be hit by political conflict over the issue of amending Article 112 or the recent Cabinet shuffle after the government has been in place for less than six months, said Thanavath Phonvichai, director of the UTCC's Economic and Forecasting Centre.

He pointed out that the index on the political situation had dropped to the its lowest level in six months, from 72.2 points in December to 69.5 points in January. The confidence index on the cost of living also dropped last month from 60.1 points in December to 57.1 points.

Thanavath said there was also concern over unclear government policy regarding taxes for diesel and gasohol.

The policy to raise the retail prices of natural gas for vehicles and liquefied petroleum gas also affected confidence negatively.

He said that if there is no severe political conflict and fuel prices do not increase too abruptly, consumer confidence should be stable by the second half of the year.

Wachira Kuntaweethep, a lecturer at the centre, said consumers' rising confidence last month encouraged them to spend more money.

The survey showed that confidence for future spending on new cars, homes, travel, and investment increased.

Other indices related to consumer confidence also grew. Based on a survey of 2,233 people, confidence in future income grew from 92.1 in December to 93.1 points last month. The index on future employment opportunities rose from 64.2 points to 65.4.

An index below 100 indicates diminished consumer confidence. In Thailand, CCIs have remained below 100 since 2005.