Monthly economic update: April 2023
Executive summary
Global Economy
- PMI March 2023 showed global economic activity’s steady rebound, led by tourism and recreation sector. However, there were softened activities in global production and employment.
- Manufacturing activities in key Asian nations were led by India, while China production was steady.
- The upturn of US economy became softened with cooling off labor market condition yet overall remained strong. With subsiding inflation pressure, real wage steadily edged up. However, demands subsided due to slowly improvement in purchasing power.
- Eurozone economy slowly improved in the first three months of 2023 mainly driven by services sector, however production activity weakened. With tight labor market but highinflation, consumer confidence improved only slowly and retail sales remained in contraction.
- China recovered but not solid yet
- Pressure on global inflation in March 2023 subsided due to continuously declines in energy price. However, Core inflation remained elevated.
- Some nations reached the end of rate hike cycle, while the others needed more rate hikes.
Domestic Economy
- In Feb23, the Thai economy continued to improve from the previous month. Private consumption indicators increased thanks to the tourism expenditure, while consumption of durable goods improved, following a pick-up in delivery of vehicles’ backlog orders.
- Private investment indicators increased from the previous month from higher investment in machinery and equipment, which was in line with increases in imports of capital goods, domestic sales of machinery, and newly registered commercial vehicles.
- The value of merchandise exports, gradually improved. This included agricultural products such as sugar and crude palm oil, while supply from other major exporters slowed down.
- Foreign tourists dropped slightly in this month but remaining over 2 million persons. The major decrease came from short-haul groups, meanwhile, Chinese tourists improved significantly over 100k since pandemic.
- Headline inflation in Mar23 eased to 15-month low due to the further drop in food and energy prices, as well as the core inflation, which also declined to below 2%.
Financial Market
- Major central banks around the world hike policy rate to curb rising inflation but with slower pace. Market participants have pointed to possibilities of the Federal Reserve delivering 25-bps rate hike on 2-3 May meeting as inflation pressures are lowered.
- Investors went into long term bond tenor, for both US and Thai bond, due to recession concerns. Moreover, 10y-2y yield spread for US government bond dropped below zero, signaling higher possibility of coming US economy recession. Meanwhile, 10y-2y yield spread for Thai government bond was still in positive territory.
- USDTHB largely appreciated in March, ending 34.14 level. It could be around 34.00-34.50 in April. US Dollar would depreciate in short-term as lessening US economic data lowers the likelihood of the Federal Reserve keeping on with its inflation-fighting interest rate hikes for longer.
