Global Economy
- PMI data in October showed continuing impacts of supply shock that pressured manufacturing outlook in Western hemisphere. Service sector in Europe subjected to rising cases of Covid-19 which prompted stricter government measures.
- Global Oil price remained elevated despite OPEC decision to increase supply. Oil price remained high while gas and coal started to drop after Chinese government increase supply. Oil should remained elevated until the second quarter of 2022
- U.S. labor market showed improvement in October adding 531,000 jobs, a highest number since July. The unemployment rate decreased slightly to 4.6% as more people quit their jobs and leave the labor force.
- Inflation pressure should last through next year as inflation trends in the United States, European countries continued to increase from broad-based changes in prices.
- Chinese economic activities returned in October unexpectedly. Both industrial production and retail sales improved in October despite supply pressure and growing Covid-19 cases.
Domestic Economy
- As of Sep 2021, Thai economy was in a recovering trend after reaching the bottom of third wave in September 2021 yet remained vulnerable.
- For supple side, Manufacturing and services slightly improved with greater momentum, agriculture turned weaker.
- For demand side, Merchandise exports recovered slightly due to the rebounding in some Thai trading partners. Meantime, imports contracted in all categories due to weak domestic demands. Foreign tourists turned slower than last month and Thai visitors experienced a slight uptick.
- Domestic activities marginally recovered: Consumption slightly rebounded but was fragile due to persisting weak supportive factors even with improved outbreak condition. Private investment marginally improved due to better sentiment in line with construction sector. However, real estate sector remained weak with greater tailwind from the easing of LTV measures by the BOT. Government accelerated budget disbursement and the stimulus.
- Inflation in Sep 2021 jumped due to energy prices and slightly improved core inflation.
Financial Market
- We’ve seen clearer picture of US economic recovery which is obviously more concreate than its peers such as EU, UK, China. Though, US faced 31-year-high inflation this month, we still think that Fed may stick to its original plan. The main downside risk for the USD in this sense may be the nomination of Lael Brainard as the new Fed Chair, given her generally more dovish stance compared to Powell but the chance is still low.
- 10Y UST has been hovering around 1.60% since mid of October, though shorter end yield such as 2Y moved more aggressively from 0.65% to 0.85%. The UST curve might start to flatten indicating Fed’s plan to hike policy rate in H2/2022.
- Shorter end TGB like 2Y start to rise as well but we still think this is a little bit very early for TGB so that there is clearly limited upside of short term TGB yield. 10Y TGB has been hovering around 1.98% like 10Y UST but with more limited upside.
- THB has gained 4.2% against USD since the beginning of October as significant foreign fund flow into Thai bond and stock markets. We expected that the impact may be in short term because we see Bank of Thailand to continue support the economy by maintaining MPC rate.
