Thai industries sentiment index dips amid flooding, soaring household debt

Negative factors including the impact of the floods and rising household debt have caused the Thai Industries Sentiment Index in August to fall to 87.7 from 89.3 in July, the Federation of Thai Industries (FTI) said on Wednesday.

Flooding in the North, Northeast and Central regions have damaged agricultural areas and slowed down the manufacturing and construction sectors, FTI chairman Kriengkrai Thiennukul said.

Meanwhile, the export sector is still suffering from high freight fees, especially on routes to the United States and Europe, he said.

The chairman reckoned that the fees have a tendency to rise due to competition from Chinese exporters and intensifying conflicts in the Middle East.

“Furthermore, the quick strengthening of the baht from 36.46 baht per US dollar in July to 34.92 baht in August has made Thai products more expensive compared to those of our competitors,” he said.

Kriengkrai added that rising household debt at 90.8% of gross domestic product in the second quarter of this year had affected people’s purchasing power as well as loan applications. The latter can be seen from the 23.71% contraction in auto loans in the first seven months of this year compared to the same period in 2023.

The FTI listed some positive factors in August, including political stability that helped restore investor confidence, and economic stimulus campaigns carried over from the previous government.

Thanks to the government's ongoing tourism promotion policies, the tourism industry has enjoyed increasing foreign arrivals in the first eight months of the year at over 23.5 million people, expanding 31% year on year, said Kriengkrai, adding that these foreigners had helped generate over 1.1 trillion baht revenue.

The August Thai Industries Sentiment Index was calculated from a survey among 1,330 entrepreneurs in 46 business types who are members of the FTI.

The FTI reported a projected confidence level of 93.9 for the last quarter of 2024, down from 95.2 projected in July. The majority of entrepreneurs said they were worried about the government’s plan to raise the minimum wage to 400 baht per day nationwide, which would increase operational costs, especially of small and medium-sized enterprises and labour-heavy industries.

The entrepreneurs, however, believed that the 10,000-baht handout scheme would help boost domestic spending as well as the tourism industry in the last quarter.