Executive summary
Global Economy
§ May PMIs data showed deteriorating situation in the manufacturing sector in European countries, while China improved. Lower number of Covid-19 cases in China led to government decisions to relax distancing measures, reviving outlook in service sector which is still in the contraction zone.
§ U.S. inflation remained high, pressuring FED hike plan. the CPI index in May displayed further increase in price level. May CPI reached 8.6%, the highest level in 41 years. Inflation remained high due to high energy and grocery prices in the United States.
§ European Union inflation continued to grow significantly 8.1% in May due to food and energy price. EU faces highest inflation in decades, ECB displayed interests to tighten in the second half of the year. ECB stated its intent to raise interest rate for the first time in the decade in July to combat high inflation.
§ China's retail and factory activity rebounded as the government relaxed COVID-19 lockdowns measures in May Retail sales in may, despite still remained in a contraction zone at -6.7%, improved from April which shrank 11.1%. Industrial production improved to expand slightly at 0.2%
Domestic Economy
§ As of Apr2022, Thai economy has been in a recovery phase but global slowdown and rising living cost dented outlook. Services and agricultural products expanded, while Manufacturing dropped. Main drags could be found in Metal products, Computer and Electronics, Furniture, representing supply chain disruption.
§ External sectors grew in line with continuous export recovery and a strong rebound in foreign tourists, which mainly came from 3EU (France, Germany, UK), Malaysia, Singapore and Japan.
§ Private consumption improved after Omicron cases dropped and tourism steadily resumed. Employment and farm incomes steadily improved with fragility.
§ Investment marginally rose in line with domestic machinery sales. Business sentiment improved but only product cost still posed a drag. Construction material sales stabilized. Real estate continuously improved in some segments.
§ Government has less room of stimulus package left for providing further support for Thai economy.
§ Inflation in Apr22 grew by 4.5% due to rising energy prices.
Financial Market
§ USDTHB remained in high level in June around 34.80 - 35.20 level. Dollar strengthened further from market expectations on faster rate hike from FED to combat US inflation. Current Account returned to negative as trade balance collapsed from slowdown in exports.
§ Thai baht depreciated around 5.2% in 2022 in line with other Asian currencies. Japanese Yen led the depreciation of Asian currencies, dropping more than 14% since last year
§ DXY continued its long bullish run from last month, extending its run to 105 before dropping down from risk-off sentiments on future recession
§ The Federal reserve hiked the policy rate by 75 bps in June, making the largest hike since 1994. Market widely expects 75 bps hike in the next Federal Reserve meeting in July to tame down inflation.
§ Market expect MPC to hike rate in the third quarter as Thai inflation rose to 7.1% in May and there are growing pressures from fund outflows and policy rate differences with other countries. Short term bond yield spiked due to market expectations on future rate hike while long term yield fluctuated from recession concerns
