BUSINESS sentiment has further improved in the third quarter from the second quarter, but low farm product prices and threat of flooding have impacted on consumption, according to the Thai-Chinese Chamber of Commerce Sentiment Index released yesterday.
Rise in private investments and continued export growth have boosted business confidence in the third quarter, said Chayodom Sabhasri, economist of Chulalongkorn University’s Economics Faculty and complier of the index.
Regarding the manufacturing sector, the index of 11 indicators such as purchasing order (70.5), production(67), employment(54), raw materials stock (60.3) and finished good stock (62.5) show that the sector continued to expand amid growth in exports.
An index higher than 50 indictates confidence improving. 500 companies responded to questions on the outlook of their businesses posted by Chayodom’s team.
However, entrepreneurs have faced fiercer competition due to new players entering the markets, and making it hard for them to raise prices of their products., he said.
Employment in manufacturing sector has yet to reach full potential, he said
Performance of the farm sector has also improved from the second quarter due to higher prices of some products, such as rice. However prices of other products remained low with most farmers remaining cautious in spending. The threat of flooding is another cause for concern and high household debts also dragged on consumption, he said.
The construction sector is expected to fare better in the third quarter compared to the second quarter , during which activities stayed flat. While the retail sector is expected to improve in the current quarter , profits may not be high due to fiercer competition, he said. Hotels and restaurants should improve in the third quarter, but operators could not raise service prices by a wide margin due to the high number of counterparts in the market.
Other service sector show no sign of improving.
The business sentiment is in line with improving economic conditions, but despite the economy projected to expand 4 to 4.5 per cent this year, businesses are still cautious about their performance.
Should the economy grow 5 per cent , it would sharply boost profits for businesses as well as employment, he argued.
President of Thai-Chinese Chamber of Commerce Jitti Tangsithpakdi, expressed his confidence that foreign direct investment will continue to grow, in particular investments from China.
A large trade and investment mission from China will visit Thailand between August 23-26, seeking investments in the Eastern Economic Corridor (EEC), he said.
The impact of trade disputes between China and the United States would have an indirect impact on the Thai economy but it would not be severe, he said.
The impact from the tour boat incident in Phuket on Thai tourism is likely to be short-term, he added.