Thai PPI index edges downwards, but still higher than many major economies

Poonpong Naiyanapakorn, the director-general of the Trade Policy and Strategy Office (TPSO), said on Monday that the global PPI showed a clear downward trend this year, with a significant decrease of 2.5% in China, its lowest level in 33 months.

The PPI measures the average change over time in the prices that domestic producers receive for their output. It is a measure of inflation at the wholesale level that is compiled from thousands of indices measuring producer prices by industry and product category.

Thailand's PPI in March was -1.7% year on year, ranking 16th out of 78 economies. Several important economies, including Taiwan, India, the United States, South Korea, the European Union, Japan, and the United Kingdom, had lower indices than Thailand. Asean countries, such as the Philippines, Indonesia, Singapore and Malaysia also had lower indices, as did Russia and China, Poonpong said.

The decline in PPI affected various product groups, such as mining, raw materials, manufacturing, and durable and non-durable consumer goods. Thai businesses should take advantage of lower production costs compared to many other countries to accelerate exports and secure global supply chains, he said.

Thailand's April PPI stood at 110.1, a year-on-year decline of 3.4% for the second consecutive month. This decrease was primarily driven by a contraction of 3.2% in the industrial products category, including petroleum products, chemicals, rubber and plastic products, and basic metals, he said. 

However, certain categories, including food and beverage, intermediate goods, and certain non-durable consumer goods, showed growth. The mining products category experienced a decline of 10.5%, mainly due to decrease in natural gas, crude oil, and metal ores. Other categories, such as food, iron, plastics, and machinery, continued to expand. The overall picture showed a relatively stable index at 108.0, despite two consecutive months of decline, Poonpong said.

The 10.5% decline in the category of products from extractive industries is due to the contraction of natural gas, crude oil, and mineral resources (zinc, lead, iron, and wolfram). Products with unchanged indices include coal and lignite, he added.

The overall index has decreased year on year for three consecutive months, from 154.6 in February to 138.3 in April, due to the high base figure in 2022, resulting in contraction for two consecutive months.

In the category of agricultural and fisheries products, there is a negative growth of 2.5% due to key agricultural products, such as fresh palm fruit, coconut, natural rubber, and fruits (durian, Cavendish bananas). The production quantity meets the demand.

For products with an increasing index, such as premium rice, sugarcane, animal feed corn, vegetables, live chickens, chicken eggs, and fishery products, the overall index fluctuates between 111.0 and 114.0, causing uncertain expansion in each month, he said.

In the remaining period of this year, the PPI is expected to see a downward trend. The mining sector and industrial sector have a slowing trend, influenced by lower energy prices compared to the previous year, as well as global demand reduction due to economic conditions, especially from important trading partners.

The price base of 2022 remains high, highlighting the contraction of the PPI, he said.

The agricultural and fisheries sector is seeing a contracting trend in the second quarter of this year due to the high base figure of the previous year. However, in the second half of this year, there could be some expansion due to the low base figure, Poonpong said.

Nevertheless, the volatility of weather conditions may affect agricultural and fisheries production, while production costs remain high, including electricity, labour, and increased interest rates.

Domestic demand supported by the tourism sector and election outcomes may also impact the demand and supply of goods and services, which will affect Thailand's production sector and PPI, respectively, he said. Therefore, businesses should closely monitor and assess the situation in order to utilise cost-effective raw materials to boost exports and effectively manage risks for cost management and price adjustments, he added.

Poonpong also advised the government to closely monitor the situation, be alert to potential risks, and efficiently manage costs and adjust product prices.