Private consumption index (PCI) eased slightly in December (2.1% YoY; Nov: 2.2%)

• Reflecting the downtrend in consumer confidence (68.3; Nov: 69.1) and average monthly wage (THB14,122; Nov: 14,160).
• 2019 (2.5%; 2018: 4.6%): a four-year low, reflecting the first growth downtrend in two years.

By segment, the softer PCI growth was due to durables and non-durables indices

• Durables (-12.0%; Nov: -9.1%): sharper contraction on continued fall in vehicle sales.
• Non-durables (-0.8%; Nov: 1.4%): first contraction in 15 months attributable to a high base effect from the economic stimulus measures disbursed via the government welfare card in December 2018.

Private investment index (PII) lessened its contraction (-3.7% YoY; Nov: -6.8%)

• However, business sentiment remained hampered (45.1; Nov: 47.4), amid relatively weak domestic and external demand.
• 2019 (-3.1%; 2018: 3.5%): weakest in ten years.

By segment, excluding newly registered motor vehicles, the improved PII growth was broad-based led by imports of capital goods

• Imports of capital goods (3.8%; Nov: -7.6%): first expansion in five months amid anticipation of an upturn in the tech cycle.
• Construction area permitted (3.7%; Nov: -3.1%): highest in over six years.

Private sector expenditure to remain subdued in the immediate term, with a gradual recovery expected in the 2H20

• Prolonged delays in the enforcement of fiscal 2020 budget and the ongoing coronavirus outbreak to cast negative spillover towards private sector activities, through demand and sentiment channels.
• Positive impact on domestic demand from a potential upturn in the tech sector would only materialise on a lagged basis, suggesting limited wage growth in the near term, especially for those in the manufacturing sector.
• Amidst the increased probability of growth moderation in the 1Q20, we continue to pencil in a 25 basis points rate cut by the Bank of Thailand at its next policy meeting, bringing the policy rate to a record low of 1.00%.

Source: Kenanga Research - 3 Feb 2020