data in August showed impacts of the Delta variant as Asian manufacturing
outlook dropped further. Service sector in China and Japan dropped
significantly into a contraction zone due to strict government measures.
export growth tapered off in the second half of the year Both global
trade volume and industrial production dropped in June, signaling smaller
growth in 2H21. Export growths declined across all major markets.
labor market displayed abysmal number as Delta variant hit in August,
adding only new 235,000 jobs. It is the lowest number since January 2021.
The unemployment rate decreased slightly to 5.2%, still the lowest level
since the pandemic started in 2020.
retail sales data surprise market as it remained high due to online
sales growth, partially supported by Delta variant. Inflation plateaued as
transport price contracted.
- Chinese economic activities dropped further in August. Inflation slowed down slightly in July due to falling food price. Japan’s service outlook dropped significantly in August to the lowest point since June 2020
- As of Jul 2021, Thai economy considerably declined after imposition of restrictions to curb the 3rd wave of domestic covid19 spreading.
- Merchandise exports recovered with softer momentum due to outbreak in several Thailand’s trading partners. Supply shortages and temporary factory shutdown owing to cluster outbreak could weigh on upcoming export momentum. Meantime imports became softened in line with domestic activities. Foreign inbounds came with greater figures after inaugurating the Phuket sandbox.
activities were fragile: Consumption
dropped significantly after the impact prevalent with only online shopping
channel encountering growth.
Thai tourists faded away. These came with worsened purchasing power, consumer confidence and slowly improved labor market. Private investment declined according to deteriorated business sentiment. Construction and real estate were also at low level. Public Investment and SOE projects were accelerated for sustaining economy.
- Inflation in July 2021 declined due to contracted raw food price and softened core inflation
- Fed is likely to announce tapering plan in Sep or Nov meeting but the outcome will not be much different as the Fed may end up with only a month more or less of gradual reduction of asset purchase. At the Jackson Hole symposium last month, Powell said the inflation threshold had already been met, and there had been clear progress on the labor market front. Though, August’s weak payrolls report, we still see Fed first hike in Q4/2022.
- 10Y UST has moderately moved up from 1.25% in Aug-21 to around 1.37%. We will continue to see more steep UST yield curve at the year end.
- THB fundamental hasn’t changed much since few months ago. Compared to USD, THB might continue to be weakening through 2021 as weaker economic recovery than global peers, negative current account, and covid-19 situation. However, passing 33.5 level will be a little bit challenge.
- Short term TGB will stick to policy rate at 0.50% at least through Q1/2023. Long term TGB yield should be raised in the medium term as 10Y UST yield on the way to recover.