Thailand’s exports unexpectedly declined by 4.2% yoy in October

Asean’s overall manufacturing Purchasing Managers’ Index (PMI) improved marginally to 49.4 in November (49.2 in October), albeit remaining under the 50 level, indicating a slight contraction in manufacturing conditions in the region. This was due to declines in production and new orders on the back of softer external demand and rising input costs, where according to Markit in the press releases, some firms may have resorted to passing on the costs to customers by raising selling prices. Furthermore, deteriorating manufacturing operating conditions were also caused by challenging external environment, which saw new export orders shrank during the month.

However, across the Asean countries, divergent performance persisted, with manufacturing PMI in Philippines, Vietnam and Myanmar above the threshold level of 50, but PMI in Indonesia, Thailand, Malaysia and Singapore continued to remain below 50-level. We believe that depreciating currencies across the region could have also added further cost burdens, suggesting that the regional manufacturing conditions will continue to remain challenging, after Trump’s US Presidential Election victory and the uncertainties of his foreign and trade policies to the region going forward. Malaysia’s manufacturing PMI fell further to 47.1 in November (47.2 in October), dragged down mainly by the sharpest decline in new orders in the series history, as well as reductions in production and stock of purchases. Indonesia’s manufacturing PMI remained below 50-level at 49.7 in November, albeit smaller decline than 48.7 in October, due to lower newexport orders, new orders, output and employment, which may be attributed to flood in some parts of the country that affected production.

In Thailand, manufacturing PMI fell to 48.2 in November (48.8 in October), the lowest level since the series began in December 2015. Markit noted that manufacturing firms surveyed pointed to faster declines in production and total new orders as well as on-going job cuts. New export orders also fell in November, and at a quicker rate than in October. This was also reflected in Thailand’s customs exports, which unexpectedly declined by 4.2% yoy in October (3.4% in September). As the country’s export growth contracted more than import growth, trade surplus narrowed more than expected to US$248.2m in October (US$2.5bn in September). With uncertainty on external environment, and disappointing October’s export growth, we believe the Thai Government may look at accelerating the fiscal measures to boost domestic demand, especially on tourism, such as the 15,000-baht tax break on domestic tour packages and other incentives.

Source: Affin Hwang Research - 2 Dec 2016