Slide in consumer confidence prompts calls for rate cut

[webfact]

CONFIDENCE INDEX
Slide in consumer confidence prompts calls for rate cut
The Nation

BANGKOK: -- Consumer confidence continued to crumble last month, prompting a call for the Monetary Policy Committee to cut the policy rate by 25 basis points to cut borrowing costs.

There remain concerns over the economy and the cost of living. And oil prices have turned to rising, fuelling pressure on people who are afraid of spending.

"Purchasing power is expected to decline and the government may need to solve this problem through an injection in the economy," Thanawat Polvichai, director of the University of the Thai Chamber of Commerce's Centre for Economic and Business Forecasting, said yesterday.

The centre's consumer confidence index fell to 79.1 in February after falling to 80.4 in January.

Other consumer confidence indices also slid: for the future to 86.4 from 87.9, for the overall economy to 68.4 from 69.7 and for finding job opportunities to 73.0 from 74.1.

All consumer confidence indices dropped after the National Economic and Social Development Board cut its target for economic growth for this year to 3.5-4.3 per cent and the price of gasoline rose by Bt2.80 per litre and the price of diesel by Bt2.30 per litre in February.

January's exports declined 3.46 per cent in light of the expected baht appreciation, while prices of crops, including rice and rubber, continued to dive.

The NESDB said gross domestic product would expand 2.3 per cent in the fourth quarter of 2014 on the recovery of consumption and private investment.

Thanawat urged the MPC to trim its benchmark rate by 25 basis points to help weaken the baht and reduce borrowing costs as a means to stimulate the economy. The MPC meets on Wednesday.

The only positive development was the Stock Exchange of Thailand Index, which has seen upticks.

On the capital market front, Kanate Wangpaichitr, president of the Federation of Thai Capital Market Organisations (Fetco), said the three-month Fetco Nida investor sentiment index edged up 2.64 per cent to 118.64 this month on the improvement of retail investor confidence.

The individual investors' confidence index increased 4.80 per cent to 113.86, while the confidence indices of other groups of investors declined. The foreign investors' confidence index retreated 3.57 per cent to 116.67.

The most influential factor on the sentiment index was the situation in other countries, followed by the local economy and its related policies

The property and construction industries were the most attractive for investment for their expected gains from the government's investment in infrastructure.

Sukit Udomsirikul, managing director of Maybank Kim Eng Securities, expects the SET Index to rise to 1,620-1,650 points this month on the European Central Bank's commencement of its quantitative easing programme and progress in the Thai government's mega-projects.

The first quarter of this year brings investment opportunities, while the second quarter may witness more market volatility.

The US Federal Reserve may signal a hike in its rates and that could raise investors' concern, he added.

Source: http://www.nationmultimedia.com/business/Slide-in-consumer-confidence-prompts-calls-for-rat-30255394.html


-- The Nation 2015-03-06

[morrobay]

And a report in another daily by a Thai economist warned that overall (including loans of all types) household debt in Thailand is approaching 100% GDP.

So confidence in the consumer is also a problem particularly for students and the North East farming population. The author warned of a 1997 like crisis

Edited March 6, 2015 by morrobay

[Srikcir]

"Purchasing power is expected to decline and the government may need to solve this problem through an injection in the economy,"

A well understood action that must happen:

"Thailand’s three most powerful private-sector organisations have expressed concern over delayed budget disbursement in the government sector, as well as falling crop prices, which could lead to an economic slowdown and low consumer spending." 2015-03-04

"Asked about the government's performance now that it has been in place for almost half a year, Supant chairman of the Federation of Thai Industries said that while the private sector acknowledged its good intentions in terms of driving the country's growth, few tangible results had been seen. "The Nation, 2015-03-04

The Junta will not cooperate:Deputy Prime Minister M.R. Pridiyathorn Devakula "stated Friday that the government will not be implementing a second round of economic stimulus package in light of indications that previous budgetary injections have made a significant impact on the country’s economy. 2015-02-07

The Junta conveniently sees the economy no longer in trouble and considers its past efforts of cash handouts and limited funding sufficient. The Junta refuses responsibility for the nation's economic failures.

Not going to happen:

[paddyjenkins]

And a report in another daily by a Thai economist warned that overall (including loans of all types) household debt in Thailand is approaching 100% GDP.

So confidence in the consumer is also a problem particularly for students and the North East farming population. The author warned of a 1997 like crisis

Looks to me like they've backed themselves into a corner. They cant cut rates because borrowing is already excessive. They cant hike rates because that will crash their economy. The only option is to boost their export sector by weakening the currency. I wont go so far as to say a devaluation, but they really need a rapid 10% depreciation to avoid being priced out of the market.

The funny thing is that in the crisis a lot of Asians were gloating and talking about Western addiction to debt and boasting of Asian values of hard work and living within their means. Some Chinese even claimed that Chinese people never borrowed, that they bought everything in cash because they are all so rich. Of course that view was borne of ignorance even of their own economy, but its taken several years for the ugly truth to come out. That was funny enough when it was just a decade since the Asian crisis. But even funnier now is that Asia has gone on another debt binge and they look set to enter a second version of the Asian crisis. It is truly incredible that even after the crisis nobody has learned a thing....Asia went on its own debt binge and the West is embarking on a second round.

Edited March 6, 2015 by paddyjenkins

[connda]

Lessons from the Fed and S&P.

Good news for the Thai stock market and the Thai HiSo community.

Everyone else, i.e., 99.9%: Som Naam Na. Suck a lemon. All you'll get is trickle-down debt.

[Cake Monster]

There is no way that the BoT can devalue the Baht, due to the massive amount of private household debt to GDP ratio within the economy, and they have already stated this fact back in November of last year, when the ratio was at around 78% of GDP, and as of today its approx 90%, with an unknown amount of " black bank " debt.

The policy committee is trying to stop de-flation by hiking the fuel prices that they know will cause inflation, however this will also have an adverse reaction in the export markets, so this is why " Goldman Sachs " only yesterday projected a defence of the Baht using a capping to protect the export market.

With the Tourist and Housing sectors in decline, and a strong Baht, things will start to get ugly very soon, when Oil starts to rise again ( which it will ).

[Pib]

The BOT of Policy Committee does not control energy prices; energy prices/taxes/etc are controlled by another part of the govt.

[jerojero]

Yes, cut the borrowing rate, thus encourage more consumer debt. Sound economics.

[morrobay]

There is no way that the BoT can devalue the Baht, due to the massive amount of private household debt to GDP ratio within the economy, and they have already stated this fact back in November of last year, when the ratio was at around 78% of GDP, and as of today its approx 90%, with an unknown amount of " black bank " debt.

So whats the cause and effect problem in a devaluatioin here in relation to household debt ? A rate cut would cause some devaluation, right ?