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Thai manufacturing growth slows in June

Staff Writer | July 3, 2018
Thailand’s manufacturing industry concluded the second quarter on a positive note, reporting a further improvement in business conditions.
Thai manufacturing
Thailand   Export sales fell
Increases in both production and input inventories slightly offset a renewed decline in new business and lower employment.

Export sales also fell, reflecting soft overseas demand.

The level of backlogs held steady, which further weighed on hiring.

Business confidence relating to output also weakened.

On the price front, inflationary pressures were subdued.

The seasonally adjusted Nikkei Thailand Manufacturing Purchasing Managers’ Index (PMI) came in at 50.2 in June, down from 51.1 in May to signal only a marginal improvement in the health of the sector.

However, the average reading for the second quarter was the best since the opening three months of 2017.

The headline PMI provides a snapshot of the manufacturing performance in the country and derives from questions on output, new orders, employment, inventories and delivery times.

The latest survey brought renewed signs of weakening client demand.

New orders returned to contraction, accompanied by a decline in export sales, indicating that demand in both domestic and foreign markets has softened at the end of the second quarter.

Lower sales saw output increase at a slower pace.

However, higher production led firms to raise purchasing activity further.

Higher buying levels were reported for a tenth month running, which also contributed to another rise in input inventories.

That said, the gain in stocks of purchases was smaller than the previous month and only marginal.

Greater appetite of manufacturing inputs failed to put pressure on supply chains.

On the contrary, vendor performance improved for a fourth straight month, albeit slightly.

Output growth also helped Thai factories accumulate greater stocks of finished products.

However, there were reports that lower sales led to higher levels of unsold inventories.

Fewer inflows of new orders enabled firms to work through their backlogs.

The level of unfinished business was unchanged from the previous month, and the lack of capacity pressure weighed on hiring.

Employment fell further in June, stretching the downtrend to a year.

A number of panellists reported that employees had left for new jobs in June.

On the price front, inflationary pressure remained muted.

While firms mentioned increased prices for raw materials, overall input cost inflation was generally marginal and below the historical average.

Subdued cost increases encouraged firms to maintain selling prices.

Finally, business confidence relating to output was dented by concerns over weakening economic conditions.