Higher costs likely to push up goods

Both manufacturing and non-manufacturing operators will likely raise product prices this quarter given higher costs, particularly for wages, according to a Bank of Thailand survey on business sentiment.

More than 600 operators responded to the monthly survey, which corresponded with the BOT's findings from visits to businesses. These included manufacturers and distributors of construction materials, property developers and contractors.

Some businesses, such as makers of office furniture and sportswear producers, can increase prices when new models are introduced. However, operators are reluctant to raise prices too sharply because of high competition.

In the current quarter of 2013, the labour market is likely to remain tight and the second phase of the national increase in the daily minimum wages may not have much impact on businesses.

The survey suggested that the overall business sector continued to see higher demand for labour amid Thailand's continued economic expansion and gradual export recovery. Operators were concerned, however, over drops in profit, which could add to their fragility if other negative factors come in.

Some groups of small and medium-sized enterprises that are highly labour-dependent and whose main markets are in Europe or the United States may see a sharp rise in shutdowns or lay-offs. Such groups include garments, ceramics and leather products.

This year's first-quarter property market is expected to continue its expansion, given growing demand for residential projects in all regions of the country.

The central bank's quarterly loan survey also estimated first-quarter lending for residential purposes to rise slightly from the final quarter of 2012.

Demand for residential projects in Bangkok and its vicinities continued to expand on easing concern over floods, and transport development, while demand for homes in major provincial cities is high thanks to urban expansion and greater economic opportunities. Residential projects are expected to see prices rise by 10-15 per cent on higher costs.

According to the survey, operators anticipate growing consumption in the current quarter on higher purchasing power after wage rises and satisfactory crop prices.

Given continued fiscal stimulus, demand for household loans, based on the loan survey, is estimated to rise in the quarter.

However, financial institutions have become more cautious in their reviews of collateral risks and borrowers' creditworthiness from the fourth quarter of 2012.

In the business-sentiment survey, most respondents expressed confidence over exports, expecting that overseas orders would likely improve from the last quarter.

According to the central bank's visits, the sectors expected to continue satisfactory exports include automobiles and parts, processed chicken, frozen chicken, canned tuna, steel and other metals.