Monthly economic update: July 2022
Executive summary
Global Economy
§ June PMIs data showed deteriorating situation in the manufacturing sector in both Asian and European countries duo to weak new orders. Businesses noticed weaker future demands for new goods as inventories are loaded. Service sector improvement varied across countries.
§ U.S. inflation rose higher due to energy price, pressuring FED hike plan. The CPI index in June displayed further increase in price level. U.S. inflation reached 9.1%, the highest level in 41 years. Inflation remained high due to high energy and grocery prices in the United States.
§ European Union retail sales contracted while inflation continued to spike EU faces highest inflation in decades. Retail trade severely contracted in May, growing about 0.5%, due to rising prices that pressured purchasing powers. ECB decided to raise interest rate in July to combat high inflation.
§ China’s economic activities continue to recover . Retail sales returned to a positive territory along with growth in industrial productions. However, China’s GDP in second quarter grew only 0.4%, lowest since March 2020
Domestic Economy
§ As of May2022, Thai economy has steadily recovered in both domestic and external sectors. Services and agricultural products expanded, while Manufacturing dropped in Computer and Electronics, Electrical appliance, representing supply chain disruption.
§ External sectors grew in line with continuous export recovery and a strong rebound in foreign tourists, which mainly came from ASEAN, East Asia and India. However, European tourists lost momentum.
§ Private consumption improved after Omicron cases dropped and domestic tourism steadily resumed. Employment and farm incomes improved.
§ Investment rose continuously especially machinery investment. Business sentiment improved but only product cost still posed a drag. Construction faced cost challenge. Real estate continuously improved both in low-rise and high-rise.
§ Government has less room of stimulus package left for providing further support for Thai economy.
§ Inflation in May22 accelerated from last month due to energy cost push.
Financial Market
§ USDTHB remained in high level in July around 35.50 - 36.70 level. Dollar strengthened further from market expectations on faster rate hike from FED to combat US inflation. Current Account remained in negative as trade balance collapsed and high importing costs.
§ Thai baht depreciated around 8.8% in 2022. In July, Thai baht depreciated the most in Asia , due to low real interest rate. The Bank of Thailand still maintain its policy rate in the previous meeting. Japanese Yen led the depreciation of Asian currencies, dropping more than 19% since last year. DXY continued its long bullish run from last month, extending its run to 109 before dropping down from risk-off sentiments on future recession
§ Market expect MPC to hike rate in August to follow suit with other countries and to combat high inflation. In June, Thai inflation rose to 7.7%. Long term bond yield contracted due to market concerns on future recession. Federal reserves plans to hike another 75 bps while ECB try to combat inflation by rising interest rate and seek a measure to control bond yield spread among European countries
