Monthly economic update: July 2026
Executive summary
Global Economy
- The global economy continues to expand, with the June PMI data still pointing to growth led by the services sector. However, renewed US–Iran tensions have clouded the outlook. On inflation, lower oil prices over the past month helped ease CPI, particularly in DMs, although the recent escalation has kept inflation risks elevated.
- The US economy remains resilient despite softer inflation and weaker payroll growth, continuing to outperform the rest of the world. In contrast, China’s economy has continued to lose momentum, as weak domestic demand has been only partly offset by robust AI-related exports. For monetary policy, global central banks remain cautious amid renewed US–Iran tensions.
Domestic Economy
- In May 2026, overall economic activity had stable compared to the previous month. Domestic demand improved somewhat, supported by higher private consumption and investment. Nevertheless, merchandised export decelerated due to strong front-loaded shipments earlier, as well as manufacturing production output which also slightly contracted, particularly in export-led sectors.
- During 2025, foreign direct investment remains strong and help boosting Thailand economic growth, with record-high BOI applications and rising FDI inflows driven by major US firms, while investment activity is increasingly concentrated in advanced electronics, digital industries, PCBs, and food manufacturing.
- The headline inflation (CPI) in June 2026 continued to rise but at the slower pace compared to previous month. This was driven by lower fuel prices in line with global crude oil prices coupled with the restructure of domestic retail oil price. Meanwhile, prepared food prices have risen broadly and at a relatively rapid pace, leading to a noticeable increase in the cost of living associated with food consumption, and resulting in accelerated core inflation.
Financial Market
- US Treasury yields rose in a steepening move, with the 10-year yield climbing above 4.60% amid renewed US-Iran tensions despite softer inflation data. Meanwhile, Thai government bond yields declined across the curve, supported by expectations of a prolonged BoT pause, easing inflation and lower bond supply.
- The US dollar remained resilient, with the index staying above 100 despite softer US inflation that led markets to scale back Fed hike expectations. Meanwhile, Asian currencies weakened as higher oil prices weighed on the region. The Thai baht was among the weakest regional currencies, depreciating beyond 33.70 per dollar due to higher oil prices, wider interest rate differentials, and lower gold prices.
