Monthly economic update: July 2024
Executive summary
Global Economy
- In June 2024, the global economy showed increasing signs of a slowdown, particularly in the US and Eurozone, as global PMIs indicated some additional weakness but remained generally strong. Meanwhile, global inflation has remained sticky but has shown a pattern of slowing down.
- With the labor market weakening and recent CPI data showing a slowdown, the US economy is increasingly indicating signs of deceleration. Additionally, other economic indicators support the trend of slowing growth. These conditions raise the chances that the Fed will lower policy rates at least twice this year.
- Recent Chinese economic data indicate that China's economic recovery is still stagnant. Q2 GDP growth fell short of expectations, and the mixed data from June reveal notable disparities across sectors. Despite government measures, the real estate market continues to face challenges.
Domestic Economy
- In May 2024, Thai economy slowed down from a good expansion in the previous month. The slowdown was attributed to decreased exports of goods, manufacturing production and private investment. Nonetheless, activities in tourism sector continued to increase from the previous month together with a slight increase in private consumption. The number of foreign tourist arrivals dropped further as mainly from long-haul tourists despite the improvement in number of tourists from short-haul destination.
- Despite gradual recovery in merchandise export, structural headwinds in manufacturing sector expected to weigh on the long-term trend of the export sectors such as lower productivity, being as low-value added production hub (HDD, ICE automotive, agricultural products).
- Headline inflation slightly decelerated in June 2024 due to the end of impact from the low base price on both price of electricity and fresh foods while other goods and services did not have a significant impact on inflation.
Financial Market
- U.S. government bond yields declined further due to weaker economic data and dovish Fed expectations. Meanwhile, Thai government bond yields showed a bull flattening trend, with the 10-year yield aligning with U.S. yields, while the 2-year yield remained flat.
- The Dollar continues to depreciate following a series of weaker US economic reports since early June and a more dovish stance from the Fed. At the same time, the Thai baht has appreciated, partly because of its high sensitivity to global factors and its connection to gold prices, even though the economic fundamentals remain unchanged.
