Confidence at lowest for 65 months

The Nation (9 November 2007)

But election offers some hope: UTCC

The Consumer Con-fidence Index dropped to a 65-month low last month, due mainly to skyrocketing oil prices and worries about the rising cost of living, the University of the Thai Chamber of Commerce (UTCC) said yesterday.

The index declined to 75.5 points, from 75.8 in September, hitting its lowest level since 2002. Other indexes related to consumer confidence also shrank to record low levels.

However, consumers were optimistic about future growth as the national election approaches.
Thanawat Phonwichai, director to the university's Economic and Business Forecasting Centre, said consumer confidence would decline continuously if the retail price of diesel were to surge to Bt30 per litre.

"Consumer confidence is forecast to continue sinking to its lowest level in the first quarter next year, if oil prices continue to rise," he said.

To encourage consumer confidence, the university suggested the government control diesel prices, which are a major element in manufacturing costs. The government must also control the prices of consumer goods to ensure the burden on consumers is not too onerous.

Thanawat said the Consumer Confidence Index could rise next month with the approach of the national election. People will be more optimistic of a clearer political situation emerging, which will boost consumer confidence.

Based on a survey of 2,253 respondents, confidence in the overall economy decreased considerably from 69.2 in September to 68.6 points last month. Confidence in employment opportunities fell from 70.3 to 69.8 points in October.

Confidence in future income increased slightly from 87.8 to 88.1 points, and the index on the overall future increased from 74.9 to 75.1 points.

A level below 100 points indicates economic pessimism.

Retail oil prices surging by Bt1.20 per litre last month had the biggest effect on consumer confidence.

Thanawat said 92.6 per cent of respondents expressed high concern about oil prices as a major factor directly affecting their cost of living.

As well as global oil price rises, other negative factors affecting confidence included concern about the rise in the price of consumer goods, the strengthening of the baht, flooding in the North, Northeast and South, and a lack of concrete plans by the government to stimulate the economy.

Positive factors leading to a rising trend of consumer confidence were the proximity to the general election, maintaining the policy interest rate at 3.25 per cent, expected economic expansion of 4.3-4.8 per cent next year, continual growth in exports, and a 61.78-point rise in the Stock Exchange of Thailand Index in October.

Research Division vice president Saowanee Thairungroj said more than 50 per cent of respondents said that now was not a suitable time to invest, travel or purchase a new car or house.

The index for the gross domestic happiness of consumers continued its fall last month, due to concerns about the rising cost of living and political instability.

The so-called happiness index slumped to 97.7 points, from 98.9 in September.