● Decline in private consumption index (PCI) eased further in June (-4.7% YoY; May: -11.5%)

− Reflective of the third phase of economic reopening on 1 rd June and continued improvement in consumer confidence (49.2; May: 48.2).

● By segment, the improvement was broad-based, led by softer decline in spending on durables and services

− Durables (-18.9%; May: -32.0%): smallest drop in four months, but remained in the double-digit territory amid elevated labour market vulnerability as signified by rising jobless claims.

− Services (-24.3%; May: -28.6%): softest contraction in three months on greater resumption of services-oriented activities as domestic COVID-19 cases continued to drop.

● Private investment index (PII) registered its first improvement in six months (-12.1% YoY; May: -18.2%)

− In line with the slightly better businesses sentiment (38.5; May: 34.4) on signs of gradual recovery in external demand as more economies lifted their COVID-19 containment measures.

● The improvement in investment environment was observed across all segments excluding the construction sector

− Imports of capital goods (-13.7%; May: -26.8%): lowest fall in three months.

− Construction material sales (-3.3%; May: -2.5%): declined for two straight months.

● Private sector expenditure to remain on a gradual recovery trend, barring a global 2nd wave of COVID-19 infections

− Private sector spending to be supported by another stage of relaxation of lockdown, marked by the reopening of border to selected group of travellers and entertainment venues on 1st July, and the injection of the first batch of the social and economic rehabilitation budget worth THB80-100b in July, aimed at increasing employment and farmers' income.

− Given the BoT’s less dovish monetary policy statement and signs of improved economic activities, we expect the policy rate to be kept at 0.50% on 5 th August, preserving the limited policy space.

Source: Kenanga Research - 3 Aug 2020