● Private consumption index (PCI) expanded to an 11-month high in February (3.4% YoY; Jan: 2.5%)

- Pumped up solely by spending on necessity goods, amid increasing worries over the COVID-19 pandemic, as reflectedby the brittle consumer confidence (64.8; Jan: 67.3).

● Bysegment, the highergrowthwasdue toincreased spending onnon-durables, outweighing a broad-based deterioration of other components

- Non-durables (2.4%; Jan: 1.0%): fastest growth in four months driven by a pick-up in fuel consumption and stockpiling of necessities, triggered by the COVID-19 fears.

- Services (-12.2%; Jan: 2.4%): first contraction since December 2018 and its lowest since the index was introduced, due to decline in VAT collected at hotels & restaurants and sales of passenger transportation, as consumers reigned in discretionary spending and avoided outdoor activities amid the pandemic.

● Private investment index (PII) registered deepest fall since the Global Financial Crisis (-10.1% YoY; Jan: -6.2%)

- Mirroring a fragile business sentiment (44.1; Jan: 48.5) amid a challenging economic episode.

● By segment, the worsened performance was attributable to wider contraction in imports of capital goods and domestic machinery sales

- Imports of capital goods (-15.3%; Jan: -2.8%): largest drop since 2009 as lockdown in China curbed trade activities.

- Domestic machinery sales (-2.1%; Jan: 0.5%): fell on delayed business expansion plans.

● Private sector expenditure to remain imperilled by adverse spillovers from the COVID-19 pandemic

- The ongoing pandemic to cast negative impacts on private sector activities, through weaker demand from major trading partners, disruption in supply chains and cautious business and consumer sentiments.

- With the grim economic outlook and based on the Bank of Thailand’s (BoT) monetary policy statement (BoT GDP forecast: - 5.3%; 2019: 2.4%), we feel that the BoT stands ready to promptly embark on another 25 basis points rate cut, bringing the policy rate to 0.50%, should the severity of the COVID-19 spread reaches a new high.

Source: Kenanga Research - 1 Apr 2020