Exports still lead the way August investment, consumption slow

[elef]

Bangkok Post

September 30, 2006

Link

 

 

Exports still lead the way

August investment, consumption slow

 

PARISTA YUTHAMANOP

 

Domestic consumption and private investment continued to slow in August, although exports remained strong, according to the latest data released by the Bank of Thailand.

 

Suchada Kirakul, senior director for the central bank's Monetary Policy Department, said domestic consumption was expected to pick up when the September data were analysed, given that petrol prices have fallen by 2.50 baht per litre for the month and diesel by three baht.

 

In August, domestic consumption grew 1.3% year-on-year, compared with 2.6% year-on-year in July. The deceleration was led by passenger car sales, imports of consumer products and oil usage, although motorcycle sales accelerated on the back of a low base and the introduction of new models.

 

Value-added tax collections fell 5.2% year-on-year to 26 billion baht, compared with 24.7 billion in July, up 9.5% from a year earlier.

 

Softening oil prices could help domestic consumption improve in the next year. Declining inflation and stable interest rates could also prove positive.

 

Private investment grew 0.6% year-on-year in August, compared with 3.1% in July. Machinery imports led the decline, owing to high base effects last year from the import of a satellite by Shin Satellite Plc.

 

Without the base effect, private investment would have grown 2% year-on-year in August, Mrs Suchada said.

 

She said investor confidence could improve going forward if the business community were to be reassured about the interim government and its economic policies.

 

Other key factors influencing the investment trend would be the status of the government's megaproject investments and plans for the disbursement of the 2007 fiscal budget.

 

The central bank's business sentiment survey for August, released earlier, also found that executives remained concerned about future corporate profitability and competitiveness.

 

Exports in August continued to grow, with a value of $11.72 billion, or 17% higher than the year before, against imports of $11.46 billion, up 11.2% year-on-year.

 

The manufacturing sector grew 7.4% year-on-year in August, compared with 6.3% in July. Production of electronic products, canned food and automobiles grew in line with exports, while leather and electrical appliances continued to decline due to eroding competitiveness.

 

Capacity utilisation stood at 74.1% in August, down from 74% in July.

 

Tourist arrivals totalled 1.198 million, a 13.2% year-on-year increase in August, with the hotel occupancy rate standing at 67.2% compared with 62.9% in July. The trend showed an ongoing recovery from the effects of the December 2004 tsunami, with most of the gains occurring in the southern coastal provinces.

 

Mrs Suchada said the current account was expected to be better than earlier expectations this year, given strong export growth and slowing imports.

 

Oil imports in August increased by just 2% in volume but 45% in price from a year earlier. Capital goods imports grew 3.7%, against 9.3% in July. Raw material imports increased 13.2% year-on-year in August, compared with 12.3% in July.

 

The current account recorded an $800- million surplus in August, $300 million from trade and $500 million from the service account.

 

The banking system's deposits rose 9.9% year-on-year in August to 6.43 trillion baht, due mainly to rises in deposit interest rates. Lending rose 6.7% to 7.12 trillion baht, slowing down from July in line with the economy.

 

The average oil price (Dubai crude) stood at $68.80 a barrel in August, compared with $68.90 in July and $60.04 in September.