Low consumption, high household debt take a toll on manufacturing index

Federation chairman Kriengkrai Thiennukul said the MPI in March this year was 104.06, down 5.13% year on year with a capacity utilisation rate of 62.39%.

“The first quarter MPI was at 100.85, down 3.65% year on year with a capacity utilisation rate of 60.45%,” he said.

The drop in MPI was due to a decline in domestic consumption amid high household debt, making people careful about their spending, he said.

“Meanwhile, exports have dropped due to a decline in demand from Southeast Asian partners, such as the Philippines and Indonesia,” he added.

However, he said tourism-related industries had expanded on tourism recovery, such as food and petroleum. He expects the government’s acceleration of budget expenditure to boost the MPI in the coming months.

Kriengkrai added that the Thai Industry Sentiment Index in April this year had dropped to 90.3 compared to 92.4 in March, including sales, purchase orders, production volume, manufacturing cost and performance.

“This came due to a decline in domestic demand amid economic volatility, such as automotive, furniture, textile and garments,” he said.

He said entrepreneurs, especially small and medium enterprises (SMEs), were still uncertain about the impact of the increase in minimum daily wage nationwide to 400 baht, which would affect their production cost and competitiveness. 

“The expiration of the government’s diesel subsidy programme [at the end of March] had pushed up fuel and transport costs,” he said, adding that a severe drought this year had led to a decline in agricultural output due to water shortage.

He said Thai entrepreneurs were also affected by imports of cheap products, the global economic volatility and the conflict in the Middle East, rising fuel price due to the Russia-Ukraine war, and the impact on border trade due to the unrest in Myanmar.

“The fiscal year 2024 budget expenditure is necessary to stimulate the Thai economy in the second half of this year,” he added.

Kriengkrai pointed out that Thai SMEs would suffer from the minimum wage hike, which could increase their production cost by up to 20%. 

A hike in electricity price would increase heavy industries’ costs by up to 40%, especially foundry, glass, steel and paper pulp, he added.

“SMEs were facing many challenges, especially high production cost,” he said. “Also, household debt was worrisome as it had caused a decline in purchasing power.”

He advised the government to deal with illegal import of products that affected Thai entrepreneurs, especially SMEs.

He also urged the government to reconsider the minimum wage hike carefully, adding that it should be increased gradually to mitigate impact on entrepreneurs with high production cost.