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Economic and Financial Outlook October 2021

22 ต.ค. 2564

Global Economy

  • PMI data in September showed impacts of supply shock that pressured manufacturing outlook. Service sector in China and Japan advanced as strict government measures were lifted.
  • Global energy and non-energy prices are rising due to supply-demand mismatch Oil price rose to 7 years high while gas and coal also rose due to new energy restriction rules in China
  • U.S. labor market displayed another month of abysmal number, adding only new 198,000 jobs. It is the lowest number since January 2021. However, the unemployment rate decreased slightly to 4.8% due to people leave the labor force. It was still the lowest level since the pandemic started in 2020.
  • European inflation spiked due to rising energy price following the inflation trend in the United States. Shortage in transport and energy boasted prices.
  • Chinese economic growth dropped in the third quarter. Both industrial production and retail sales fell flat in September. Inflation remained in producer side.


Domestic Economy

  • As of Aug 2021, Thai economy was apparently impacted by the heightened third wave outbreak.
  • Merchandise exports recovered with softer momentum due to outbreak in several Thailand’s trading partners, while imports also dropped due to weaker domestic demands and some halted production activities, arising from temporary factory shutdown. Foreign inbounds and Thai tourists also slightly declined due to such outbreak situation and strict covid19 prevention measures.
  • Domestic activities were fragile:  Consumption dropped significantly in all categories with vulnerable retail sales due to softened purchasing power, worsened consumer confidence and labor market. Private investment marginally declined in accordance with deteriorated business sentiment. Construction was at low level but started to show positive signal, real estate is about to rebound in Q4 in line with overall economic activities. Public Investment and SOE projects were accelerated their budget disbursements.
  • Inflation in Aug 2021 contracted due to declined raw food price and softened core inflation


Financial Market

  • We now have a more concrete picture about FED’s tapering plan which should begin in November and last until mid 2022. Also, markets improve their views on interest rate increase as the dot plot shows higher probability of increasing policy rate in 2022. It is expected Fed to first hike its policy rate in H2/2022.
  • 10Y UST has aggressively moved up from 1.31% in mid of Sep-21 to around 1.65%. The steepening trend of US yield curve is very obvious and we will continue to  see more steep UST yield curve at the year end as 10Y – 2Y UST is still not very too high.
  • Short term TGB will stick to policy rate at 0.50% at least through Q1/2023. Long term TGB yield might  be raised in the medium term  with more limited upside compared to Long term UST.
  • THB fundamental hasn’t changed much since few months ago. Compared to USD, THB might continue to be weakening through 2021 and H1/2022 as weaker economic recovery than global peers, negative current account. The reopening scheme should not impact the weakness of THB due to expected low volume of tourists