Monthly economic update: June 2023
Executive summary
Global Economy
- Global demands have been slowing down in line with softening production activities. Production sentiments were negative in US and EU.
- Pressure on global inflation steadily subsided in May 2023 due to continuously declines in energy. OPEC cut had posed slight pressure on crude oil price recently.
- US economy
continuously softened, as shown in merchandise exports and domestic demands.
A recent increase in initial jobless claims shown a cooling labor market, yet overall remained strong. - EU economy was stagnant asshown by negative GDP momentum in the last two consecutive quarters. Only Germany have been in technical recession. High living and funding costs took a toll on continental demands with strong labor market. Eurozone’s Inflation has remained too high for too long, tightening policy is further required in the view of ECB.
- UK economy barely had growth in Q1/2023. Domestic demands were fragile. Merchandise exports contracted with weakness in key trading partners.
Domestic Economy
- In Apr23, the Thai economy slowed compared to the previous month. Private consumption improved on the back of spending in the service sectors, while non-durable good purchase remained at a similar level.
- Private investment indicators declined decreased from the previous month as investment in machinery and equipment softened in all categories.
- The value of merchandise exports excluding gold declined from the previous month, on both major products and key partners (except China) which was in line with weaker manufacturing production.
- The number of foreign tourist arrivals declined slightly from the previous month. This was due to Europe, Russian and middle east tourists dropped in this month. Meanwhile, neighboring tourists rebounded.
- Headline inflation in May23 eased to 21-month low due to the high base effect in fresh food and core inflation. Meanwhile, energy inflation increased in line with the global crude oil prices.
Financial Market
- Major central banks around the world hiked policy rate to curb rising inflation but with slower pace. Market participants have pointed to possibilities of the Federal Reserve holding the policy interest rate as inflation pressures are lowered.
- 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, signaling higher possibility of coming US economy recession. Meanwhile, 10y-2y yield spread for Thai government bond was still in positive territory.
- USDTHB largely depreciated in May, ending 34.74 level. It could be around 34.50-35.00 in June. US Dollar rebounded as investors consider probabilities of further rate hikes from the Federal Reserve (Fed) though it is deemed that the Fed would likely pause its hike in June meeting.
