Consumer confidence up

The Nation (14 December 2007)

Consumer confidence is showing signs of recovery before the general election, despite rising concern over spiralling oil prices, according to a survey released by the University of the Thai Chamber of Commerce (UTCC) yesterday.

The consumer confidence index turned upward last month for the first time in 13 months, thanks to recovering sentiment before the national election on December 23.

The index rose from 75.5 points in October to 76.2 points in November. All related confidence indexes also followed the upward trend because of the clearer political scene.

However, consumers are still worried about the higher cost of living, driven by rising oil prices.
Thanawat Phonvichai, director of the university's Economic and Business Forecasting Centre, attributed the rising index last month to the upcoming national poll. However, it is too early to say that increasing consumer confidence is here to stay, he said.

"People foresee a clearer political situation. However, the sentiment will be easily hit by any uncertainties. The new government should be carefully aware of any confusion after the election," said Thanawat.

He added that this was the beginning of a recovery. If the political situation shows more stability and oil prices do not surge too much, a normal rate of consumer confidence should be seen in the second quarter next year.

Confidence in the overall economy rose from 68.6 points in October to 69.3 points last month.
Confidence in future income improved from October's 88.1 points to 89.1 last month, while the index on future employment opportunities rose from 69.8 to 70.3 points. Other positive factors contributed to the rising index, including the constant policy interest rate, the Finance Ministry's higher projection of economic growth from 4 to 4.5 per cent this year, and robust export growth of 28 per cent in October.

Despite the upward trend, an index figure below 100 still represents weak consumer confidence. The university's index was based on a survey of 2,253 respondents.

Negative factors last month include an increase in the domestic retail oil price by Bt1.20-Bt1.70 per litre, a SET Index decrease by 60.84 points during the month, the baht's strengthening from 33.99 to 33.85 per US dollar and concerns over the rising cost of living.

Consumers still believe this is not a suitable time to purchase new houses and cars, start new investments or travel.

Thai Chamber of Commerce vice chairman Dusit Nontanakorn said the political situation was still the highest concern of consumers. The new government must urgently set up a stable Cabinet and economic team to increase confidence. When domestic spending recovers, the country's economy should be back on track, he said.

Dusit said domestic spending would be the key driver of the economy next year as exports would show slower growth from the global economic slowdown, particularly in the United States.
"Businessmen are closely monitoring political movements. If the upcoming government can boost investment and domestic spending, the economy should recover in the fourth quarter next year," he said.

To increase economic growth, the government must concentrate on promoting domestic spending and cross-border trading, increasing foreign investors' confidence, and starting public investment to draw private investment.

In addition, the survey found that the gross domestic happiness index had increased from 97.7 points in October to 99.3 last month. However, consumers still expressed concern over the rising cost of living in the future.

Meanwhile, the MasterCard Worldwide Index of Consumer Confidence survey showed that Thai consumers had regained some of the confidence they lost six months ago. However, the current index score of 44.2 is still below the market's historical average of 55.7.

While consumers have regained some confidence with regards to the outlook on employment, the economy, stock market and quality of life, sentiment towards regular income has dropped 17.1 points.

The overall outlook across Asia-Pacific with regards to the economy (68.3), regular income (81), stock market (66.5) and quality of life (66.7) has improved from the previous survey, which was conducted in May. The view on employment (63.8) remains constant.

The volatility in world financial markets, the announcement of heavy sub-prime losses by global financial heavyweights, rising oil prices and inflation costs seem not to have dampened confidence for the first half of next year.