Thailand’s industrial production continues to fall

Thailand’s industrial production activity fell for the 16th consecutive month in July, government data released on August 29 showed – a decline driven by falling auto production and sluggish export growth.

The Manufacturing Production Index (MPI), which measures the volume of production in the country’s manufacturing sector, slipped 5.2 per cent year-over-year in July, according to the Office of Industrial Economics (OIE) at the Industry Ministry.

The latest figure showed a slower decline when compared with a revised 6.3 per cent contraction in June.

Moody’s Analytics blamed months-long political unrest, which ended in May with a military coup, for the July contraction, saying it is still weighing on production, while HSBC added that weak export growth and slow recovery in domestic demand have contributed to lower production activity.

Exports declined 0.85 per cent year-over-year while imports contracted 2.86 per cent on-year in July.

The country’s automotive production contracted 24.89 per cent in July from the same time last year, largely because of a drop in local demand after the end of the government’s first-car tax incentives in 2013, said the OIE.

In addition, capacity utilisation, a gauge on how fully used factories are, slipped slightly to 60.09 per cent in July compared with a revised 60.58 per cent in June.

Despite improved consumer and business sentiment, the latest data reflects ongoing challenges for the military government to revive the economy.

“If export growth stays weak, there could be negative impacts on Thailand’s domestic demand, including delays in business investment to expand existing capacity, and weaker consumption spending,” says Nalin Chutchotitham, an economist at HSBC, adding that “the government must continue with measures to boost exports.”