Monthly economic update: October 2022
Executive summary
Global Economy
- PMIs data of September 2022 hinted at falling global economic activities (recession risk) amid persistent inflation and a contraction in the economy of both Europe and UK.
- Global commodity prices further eased due to weaker global demand, recession fear and a two-decade high USD. However, there were elevated and therefore put pressure for a big-size rate hike for several central banks.
- US labor market condition remained tight, however with a loosing degree. Retail trade became softened as high inflation and rising borrowing costs hit purchasing power.
- Chinese economy and labor market slightly improved after relaxation of COVID-19 curbs and government efforts to sustain a recovery momentum. However, the recovery was shaky due to property sector crisis and status quo in zero-tolerance Covid-19 policy.
- Retail sales in Japan continuously rebounded. However, high global energy prices and a slump in Japanese yen put great pressure on inflation, challenging the BOJ’s altra-loose stance.
Domestic Economy
- In August 22, Thai economy continued to recover but at a slower pace for the second consecutive month. Private consumption indicators remained close to the previous month. Private investment improved slightly.
- The value of merchandise exports (ex. gold) increased slightly from previous month, mainly from export of industrial products. By key partners, China’s trading demand remain dropped while demand from U.S and EU accelerated.
- Foreign tourists in August increased consecutively to reach a new peak since pandemic. The major groups still came from East Asia. Moreover, European tourists show a signal of return
- Public spending, excluding transfer payment, expanded from the same period from expansion in both the current and capital expenditure of the central government as well as capital expenditure of state-owned enterprises.
- Headline inflation in September 22 start decelerated due to energy, food prices stabilized while core inflation also mark at 3% level.
Financial Market
- Major central banks around the world hiked policy rate to curb rising inflation. The Federal Reserve hike 75 bps on 21-22 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 September, ending 37.915 level. It could be around 37.80-38.20 in October. 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.
