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US manufacturing activity falls to lowest level in a decade

The Thaiger

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US manufacturing activity falls to lowest level in a decade | The Thaiger
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“The data show American factories remain plagued by pullbacks in business investment at home, softer demand throughout the world and, until recently, an escalating trade war between the U.S. and China.”

US manufacturing had a tumultuous year in 2019 with the weakest monthly performance for a decade, with orders shrinking and factories continuing to roll back production. The closure of the Boeing 373 Max production line in early December was a final punctuation mark in a poor performing year (although largely un-related to the US manufacturing sectors’ problems).

Stocks and Treasury yields, already posting lower after a US airstrike killed one of Iran’s most powerful military leaders, extended declines following the report. The Institute for Supply Management’s purchasing managers’ index fell to 47.2 in December from 48.1, the fifth straight month of contraction

It was the Index’s worst reading since June 2009, marking the eighth decline in the last nine months. Any readings below ’50’ indicate activity is shrinking.

Timothy Fiore, chair of the ISM’s manufacturing survey committee says that trade issues remain an issue for supply managers.

“I think that unplanned factory closures and extended holiday periods had a part to play on the production side and likely the employment side. Fifteen of the 18 manufacturing industries reported contraction in December, led by apparel and wood products.

The US’s two most-watched manufacturing surveys pointed in different directions in the November figures underscoring disagreement among economists and investors on which index offers a more accurate picture of the sector.

The ISM index averaged a reading of 51.2 for all of 2019, but it was also the lowest in a decade. That’s down 7.6 points from 2018’s average, the steepest drop since 2001. But the two indexes agreed that December was a poor month for the sector.

A partial trade deal between China and the US was announced on December 13. US President Donald Trump says he will sign it on January 15.

“While a thawing in trade relations (with China) could help, factories still face the repercussions of policy uncertainty, a weak corporate investment climate and a step down in global growth that will have a lingering impact on factory decisions in 2020.”

Back to Boeing, the US aircraft manufacturer has told its suppliers to suspend parts shipments starting in mid-January following the grounding of the aircraft and ceasing of production. Boeing’s problems will probably be a drag on manufacturing for the next four to six months (assuming the US FAA gives the 737 Max a go ahead to take to the skies again).

The imports gauge contracted for the eighth time in nine months and the export gauge dipped further below the line between expansion and contraction.

SOURCES: The Nation | Bloomberg

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Tourism

Former WTO director cautions against re-opening Thailand too quickly

Maya Taylor

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Former WTO director cautions against re-opening Thailand too quickly | The Thaiger
PHOTO: Bao Menglong on Unsplash

The former director general of the World Trade Organisation has issued a caution against Thailand throwing open its borders too early. Supachai Panitchpakdi says Covid-19 is still very much a threat, pointing to other countries that appear trapped in a cycle of easing restrictions, followed by renewed lockdowns. His comments come as England emerges from a national lockdown, only for many areas to find themselves subject to even tougher measures, at least until Christmas.

According to a Nation Thailand report, Supachai says the cycle of lockdown/open up/lockdown that’s being seen in many Western countries is not just damaging their economies, it’s also leading to more infections and deaths. He warns that re-opening Thailand’s borders too quickly could have long-term negative impacts for the Kingdom.

“Thailand should gradually open the country, because human resources are the most important factor. It takes about 20 to 30 years for human development, and if those people die, it will be very difficult to restore the lost human resources.”

Within Thailand there is a polarised view as to whether Thailand should be broadly re-opening its borders or not. Successive polls show that the Thai population is, generally, suspicious about re-opening too soon, especially whilst parts of the rest of the world are still trying to contain their infection rates. On the other hand Thailand’s tourism and hospitality industry has been decimated with millions unemployed.

Supachai’s comments come as the government has tentatively opened the borders to foreign tourists, albeit at a significant cost and inconvenience to those who might want to visit. There is both a long term STV, special tourist visa, and a modified general tourist visa for up to 60 days. In both cases there is currently a 14 day mandatory quarantine to be served and a number of other paperwork hurdles to overcome.

Supachai says Thailand’s economy is likely to shrink by 5 or 6% this year, a change from the previous forecast of 7 or 8%. He adds that he’s hopeful the economy and exports will recover next year, pointing out that if a quick recovery is seen in China and ASEAN nations, it will help Thai exports. He warns that an appreciating baht could threaten Thailand’s exports and that exporters will need to look at ways of increasing their competitive edge.

He has also called for a hike in interest rates, pointing out that the low rate of 0.5% is having a detrimental effect on people’s savings. Another fallout from the pandemic is an increase in household debt, with Supachai expressing concern that Thai people are getting into debt at a much younger age compared to the trend in other countries.

SOURCE: Nation Thailand

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Thailand

Finance Minister says Thailand’s GDP will take 2 years to recover

The Thaiger

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Finance Minister says Thailand’s GDP will take 2 years to recover | The Thaiger

Thailand’s finance minister says the countrys GDP will take 2 years to recover the 9% it has lost since the Covid pandemic ravaged the economy. Arkhom Termpittayapaisith, the Finance Minister, says the economy would have expanded by 3% this year if it weren’t for the pandemic.

“The pandemic crisis will make the economy contract by around 6% in 2020, therefore there is a 9% gap that needs to be recuperated. If Thailand’s GDP growth could arrive at 4% in 2021 and 2022, this would propel the country’s economic growth momentum to return to a normal ratio.”

The National Economic and Social Development says Thailand’s GDP contracted by 6.4% year-on-year in the 3rd quarter, with a yearly economic contraction projected to be 6%. Previously, it was predicted to contract by 7.5%, however, since the global economy is projected to contract by 3.5% and the global trade is expected to decline by 11%, the number has been updated.

The seasonal adjustment saw the economy expand by 6.5% quarter on quarter from the 2nd quarter, with it contracting by 6.7% in the first 9 months. However, the NESDC’s projection doesn’t account for the impact from political conflicts or a 2nd wave of outbreaks.

Such political conflicts as the protests against the monarchy have seen some authorities, such as the Chief ASEAN economist, saying it won’t help Thailand’s weak economic recovery. But Krisada says the Thai economy is expected to recover gradually, with a possibility of vaccine use and the global economic recovery helping to push forward the recovery next year.

Arkhom says the government reportedly has 30% fiscal space left in its 2021 budget, to help cushion the economic crisis. That percentage is about 980 billion baht worth of capital, which excludes the remaining sum of the 1 trillion baht loan decree.

As for the 2022 budget, he says it is still being designed to support economic growth through public investments in infrastructure and energy, with some projects relying more heavily on help from the private sector.

SOURCE: Bangkok Post

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Business

Bank of Thailand takes action to curb Thai baht’s strength

The Thaiger

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Bank of Thailand takes action to curb Thai baht’s strength | The Thaiger

The Bank of Thailand has moved forward measures, originally meant to begin early 2021, but most of which will now take effect from end of this month. The end result is that the new rules will make it easier for Thais to shuffle money overseas and invest in foreign assets. It will also make is easier for Thai citizens to hold foreign currency in local banks. The new rules will also require the registration of local and overseas bond investors.

“Following the U.S. elections and positive news on Covid-19 vaccine development, investors have turned toward investing in emerging markets, including Thailand. The situation has resulted in strengthening the baht quickly and can impact economic recovery.”

“The registration of bond investors will allow close monitoring of investor’s behaviours and thereby enable the implementation of targeted measures in a timely manner.”

Last week the Bank of Thailand assessed that the Thai baht’s recent rapid gains could affect the country’s “fragile” economic recovery. The Thai government has called on the central bank to do its best to use what tools it has at its disposal to restrain the baht to protect exports.

Khoon Goh, head of Asia research at ANZ Banking Group, says that he central bank also will continue to resort to direct intervention in foreign-exchange markets.

“The issue here is that local investors have a very strong home bias. Making it easier to invest overseas may not actually encourage them to do so.”

The Thai baht has been the 2nd best performer in Asia this month after foreign investors turned net buyers of almost $2.4 billion of bonds and stocks as appetite returns for riskier emerging-market assets amid a weak dollar, according to Bloomberg.

The Thai baht had recently rallied 8.8% from this year’s low in April, hitting a 10 month high last week.

SOURCE: Bloomberg

This morning, Thai time…

Bank of Thailand takes action to curb Thai baht's strength | News by The Thaiger

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