● Private consumption index (PCI) reversed to chart the steepest contraction in four months in October (-1.2% YoY; Sep: 0.0%) reflecting the absence of special long holidays

- This was in contrast with the gradual improvement in employment (0.8% YoY; Sep: -1.3%), average monthly wage (3.4%; Sep: 2.7%) and consumer confidence (50.9; Sep: 50.2%).

● By segment, the downturn was broad-based, led by the non-durables index

- Non-durables (-3.4%; Sep: 1.2%): fell at the fastest pace since May largely due to a negative turnaround in fuel consumption (-4.4%; Sep: 10.5%).

- Services (-24.2%; Sep: -22.0%): contraction widened slightly on further decline in VAT collection at hotels and restaurants as domestic travels may have slowed amid the lack of special holidays in October.

● Private investment index (PII) recorded a larger fall (-4.9% YoY; Sep: -3.7%) partly on a high base effect

- Business sentiment decreased to a three-month low (45.4; Sep: 47.5) possibly dented by the intensified antigovernment protests, which led to the declaration of a state of emergency in Bangkok (15-20 Oct).

● The weaker performance was attributed to the machinery & equipment segment

- Imports of capital goods (-15.6%; Sep: -8.1%): deepest drop since July amid a high base in the preceding year. On a MoM-basis, it continued to expand, albeit at a smaller rate (0.7%; Sep: 4.2%).

● Private sector activities are expected to track a gradual recovery path, despite several headwinds

- Extended fiscal measures and a broadly controlled COVID-19 situation are expected to allow the Thailand’s economic recovery to continue, although partly slowed by headwinds arising from a spike in COVID-19 cases overseas and the prolonged domestic political turmoil. Against this backdrop, we expect the GDP to register at - 6.2% in 2020 (National Economic and Social Development Council's forecast: -6.0%; 2019: 2.4%).

- Policy-wise, though portraying slight dovishness, we continue to expect the BoT to keep the policy rate unchanged (0.50%) at the final policy meeting this month, underscored by the BoT’s goal of preserving its limited policy space.

Source: Kenanga Research - 1 Dec 2020