Thai's Dec. Consumer Confidence Rises

Thailand’s consumer confidence rose in December compared to that in the previous month, indicating an improvement in domestic spending which accounts for the majority of overall economic activity.

According to the data released Thursday by the University of the Thai Chamber of Commerce, the country’s consumer confidence index, which is a leading indicator as it can predict the consumer spending, rose to 70.60 in December from 69.40 in November.

This report comes after it was revealed last month that Thailand’s industrial output grew more than expected in November compared to that in the same month last year, which was dramatically hampered by floods.

According to the data released last month by the Office of Industrial Economics of Thailand, the country’s industrial production, which measures the change in the total inflation-adjusted value of output produced by manufacturers, mines and utilities, rose 83.3 percent in November to 189.11, from a revised 36 percent in October.

Meanwhile, Thailand's consumer price inflation rose at a higher rate than expected in December, indicating that the country’s inflationary pressures continue to increase, harming the prospects for further loosening the monetary policy.

According to the data released last week by Thailand’s Ministry of Commerce, the country’s CPI, which measures the change in the price of goods and services from the perspective of the consumer, rose 3.63 percent in December from 2.74 percent in November. Analysts were expecting that the CPI, which is a key measure of changes in purchasing trends and inflation, would rise 3.23 percent.

On Wednesday, the Bank of Thailand’s (BoT) decided to keep its policy rate unchanged at 2.75 percent. In October, the central bank cut the policy rate by 25 basis points.

“Policy settings are likely to remain on hold in the near term. Domestic demand will be supported by minimum wage hikes and a corporation tax cut at the start of 2013, while a pick-up in global growth should help Thailand’s exports. Further ahead, many now believe that the BoT's next move will be a rate hike. In our view, though, the global recovery is likely to falter and put rate cuts back onto the table. Note that manufacturing accounts for some 40 percent of Thailand’s GDP and export weakness would quickly feed into this sector,” Capital Economics said in a note.

The central bank cited the possibility of China’s economy slowing further and an escalation in the euro zone crisis as significant downside risks for Thailand and the rest of emerging Asia.