Monthly economic update: September 2022
Executive summary
Global Economy
- GDP figures of Q2/2022 showed several nations have lost their growth momentum. Global recession risk seems to even worsened in Q3.
- PMIs data of August 2022 showed a contraction in the manufacturing activities across nations, particularly in China, the UK and European counterparts.
- Global commodity prices have started to ease due to weak demand amid recession concerns, a pressure from two-decade high US dollar , agricultural supply improvement. However, energy prices remain under high pressure in August.
- Global inflation is decelerating through H2/2022, but it remains far too high for central bankers with its forecast for 2022 and 2023 are 8.3% and 5.7% respectively.
- Major central banks have recently promised to continue delivering a hiking decision to tame inflation despite softening price pressure.
- Retail sales have started to soften in several nations, while some have rebounded sluggishly due to weakened purchasing powers.
Domestic Economy
- In July 22, Thai economy continued to recover but at a slower pace. Private consumption and private investment declined slightly after accelerating in the preceding periods.
- The value of merchandise exports also declined in line with lower trading partners’ demand particularly in trading with U.S., China and Japan. By products, major export of auto and parts, computer and parts, and rubber products also dropped significantly.
- Foreign tourists in July increased consecutively to reach a peak since pandemic at 1M. The major groups still came from East Asia. Moreover, European tourists show a signal of return
- Public spending contracted from capital expenditure of the central government. Nevertheless, the service sector continued to improve thanks to increases in foreign tourists, while manufacturing production also saw a slight improvement as producers received more electronic parts from supplier abroad.
- Headline inflation in August 22 continuing accelerated to the fresh highest level since 2008 due to more cost-transmitted effects and lower supply in food products, high energy cost-push remained. Core inflation also reached 3% level.
Financial Market
- Major central banks around the world hiked policy rate to curb rising inflation. The European Central Bank (ECB) unprecedently hike 75 bps on 8 September. Meanwhile, the next rate decision of Federal Reserve is expected at least for 75 bps in attempt to control high costs of living.
- Investors went into long term bond tenor, for both US and Thai bond, due to recession concerns. Moreover, 10y-2y yield spread for US government bond dropped below zero, negative yield curve signal higher possibility of coming US economy recession. Meanwhile, 10y-2y yield spread for Thai government bond has sharply declined but was still in positive territory.
- USDTHB remained in high level in August, ending 36.5 level. It could be around 36.70-37.10 in September. Dollar would strengthen further from market expectations on faster rate hike from FED to combat US inflation. The strong dollar put pressure on Asian currencies together with negative real interest rate.
