Private consumption index (PCI) eased to a four-month low in January (1.1% YoY; Dec: 2.1%)

• - Reflecting the continued downtrend in consumer confidence (67.3; Dec: 68.3) amid softer household income.

By segment, the softer growth was due to lower spending on services

• - Services (1.0%; Dec: 3.6%): slowest growth in 13 months primarily due to decline in VAT collected at hotels and restaurants as tourism activities were hampered by the COVID-19 outbreak.
• - Durables (-2.9%; Dec: -12.0%): registered the largest improvement amongst all the sub-indices on improved vehicle sales driven by the launching of new car models.

Private investment index (PII) registered deeper contraction, weakest in over 10 years (-8.7% YoY; Dec: -3.7%)

• - Mirroring the fragile sentiment among businesses given the bleak domestic and external demand outlook.

By segment, the worsened performance was attributable to decreased imports of capital goods and sales of construction material

• - Imports of capital goods (-5.1%; Dec: 3.8%): reverted into a contraction.
• - Construction material sales (-3.0%; Dec: 1.5%): dropped on delayed capital expenditure plans.

Private sector expenditure to remain weighed by adverse spillovers from the COVID-19 epidemic

• - The ongoing coronavirus outbreak and drought condition to cast negative impacts on private sector activities, through demand, distribution and sentiment channels.
• - Disruptions in the global supply chain to delay any recovery in global demand arising from an upturn in the tech sector.
• - Amidst the increased probability of a deeper growth moderation in the 1Q20 and possibly 2Q20, we continue to pencil in another 25 basis points rate cut by the Bank of Thailand, after slashing it to a record low of 1.00% last month

Source: Kenanga Research - 2 Mar 2020