Monthly economic update: August 2026
Executive summary
Global Economy
- The global economy continued to expand in July, reflected in PMI data. However, signs of a slowdown are becoming more evident in major economies, particularly the US and China, as reflected in weaker economic surprise indices and Q2 GDP growth. On inflation, despite escalating Middle East tensions and higher oil prices, the impact across major economies has so far remained contained, with inflation trends mixed across countries. In addition, tariff risks are back on the radar as Section 122 expires and Section 301 forced-labor measures emerge, with further measures in the pipeline.
- US economic momentum is weakening, with the labor market showing clearer signs of cooling. Meanwhile, China’s July data show further loss of momentum as tech strength fails to offset weak domestic demand. For monetary policy, central banks signal diverging rate paths amid inflation risks.
Domestic Economy
- In June 2026, overall economic activity had relatively stable compared to the previous month. Private consumption increased, partly supported by government stimulus measures. Meanwhile, exports and private investment expanded, driven primarily by technology-related products, most of which rely heavily on imported inputs. On the other hand, industrial production and tourism-related services softened.
- According to the new US tariff regime to Section 301 Forced Labor, despite the implementation across most trading partners and expanded exemptions, which could soften the effective impact on Thailand, but recent classifying Thailand as a high-linkage partner with China poses an increasing upside risk to future US tariff and trade restriction actions.
- Thailand’s GDP growth in 2Q/26 exceeded market expectations but moderated from the previous quarter, weighed by softer private and public consumption. Meanwhile, private investment accelerated to its strongest pace since 2012, driven by robust imports of capital and industrial goods, prompting NESDC to revise up its GDP growth forecast this year to 2.2%.
Financial Market
- US Treasury yields continued to steepen, with short-term yields falling after weaker-than-expected labor data and no upside inflation surprises reduced expectations for a Fed hike. Meanwhile, longer-term yields rose amid fiscal and inflation concerns, putting upward pressure on long-end yields globally. Thai bond yields rose across the curve, tracking global moves, particularly at the long end.
- The US dollar weakened, with the index falling below 100 as softer data prompted markets to pare Fed hike expectations despite lingering inflation risks from Middle East tensions. The Thai baht strengthened, with its MTD return ranking among the top performers despite relatively weak domestic economic fundamentals. The appreciation was largely driven by external factors, particularly broad-based US dollar weakness and the continued rise in gold prices.
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