Industrial confidence increases in October

The Thai Industries Sentiment Index (TISI) rose to 89.1 points in October, following a two-month decline, as more purchase orders poured in for the final quarter for year-end festivities, says the Federation of Thai Industries (FTI).
The indicator, which reflects business confidence among the FTI’s members, was 87.1 and 87.7 points in September and August, respectively.
“The third and fourth quarters are typically good for manufacturers who receive more purchase orders,” said Nava Chantanasurakon, vice-chairman of the FTI.
Higher demand for products for Christmas and New Year festivals, especially from the US, Europe, India and Southeast Asia, caused an export uptick.
Exporters also paid less for logistics costs as freight rates to the US and Europe decreased, said Mr Nava.
October was also a month when local entrepreneurs began to see a decline in financial costs after commercial banks announced a decrease in lending interest rates, following the Bank of Thailand’s decision to lower the policy rate, he said.
The central bank’s Monetary Policy Committee voted 5-2 to lower the policy rate by 0.25 percentage points, from 2.5% to 2.25%, to reduce debt-servicing burdens for borrowers.
The central bank insisted that the lower policy rate will not hinder debt deleveraging, given the anticipated slowdown in loan growth, and remains consistent with the country’s economic potential.
Mr Nava is also upbeat about tourism for the remainder of the year as foreign arrivals reached 28.3 million year-to-date as of Oct 27.
“The high tourist season in the fourth quarter is helping to generate sales,” he said.
However, a better TISI in October does not mean Thailand is safe from economic problems.
People’s purchasing power remained weak while non-performing loans (NPLs) continued to increase by 13.3% year-on-year in October to 1.18 trillion baht, said Mr Nava.
Banks are maintaining tight lending criteria to avoid NPLs as household debt balloons, but this has hamstrung the automotive and real estate sectors.
Overall loan growth in the banking system, including licensed banks and their subsidiaries, slowed to 0.3% year-on-year in the second quarter of 2024, down from 0.7% in the first quarter, according to the central bank’s report.
The slowdown in loan growth, combined with improving GDP growth, has been a key factor in reducing the household debt-to-GDP ratio, which fell to 89.6% in the second quarter of this year, from 90.7% in the first quarter.
The October TISI was based on a survey of 1,365 executives across 46 industries under the FTI. Most respondents were worried over baht fluctuations which would affect Thai exports.