Industrial output at seven-year low

Industrial output in November fell to its lowest level since its beginning in 2002 with capacity utilisation down to nearly 50%, reflecting business operators' concerns about the impact of the global economic slowdown.

The figures compiled by the Industry Ministry also reflected anxiety over political tensions that resulted in the eight-day seizure of Bangkok's airports by anti-government protesters, said Arthit Wuthikaro, the director-general of the Office of Industrial Economics (OIE).

"Not only local politics, the impact of the global economic slump on our economy is also becoming clearer. Both are severely affecting the Thai economy, which is very stressful for businessmen," he said yesterday.

The industries of greatest concern include jewellery and parts, electronics, plastics and automobiles.

The industrial production index for November was 168.39, down 8.36% from 183.76 a year earlier. The index also declined in October, but by only 0.9%.

The ministry began compiling the index in 2002, from a base of 100. It peaked at 189 points in 2006 at a time when industrialists were still confident about future earnings despite the political tensions that culminated in a military coup in September of that year.

Production capacity utilisation in November this year dropped to 56.21% from 60.8% in October, in contrast to levels approaching 100% in some sectors a few years ago when the economy was making a healthy recovery after the 1997-98 crisis period.

Average output increased by 11.5%, 9.4% and 5.8% respectively in the first three quarters of this year, but a decline is likely in the last quarter.

"There is one month left for this fourth quarter that we need to wait to see the exact figure, but it is projected to drop from the third quarter by 6.3% on average. I also expect to see the index drop further by 5.5% in the first half of next year," Mr Arthit said.

The jewellery industry has been the hardest hit, with production utilisation down nearly 40% compared to the same period last year, followed by petrochemicals and plastic pellets, down 32.7%, with sales down 15.5%. The electronics and parts industry's utilisation dropped 15.5%. Automobile and parts capacity utilisation declined only 5.2% but sales dropped 8.6% from a month before.

The sales difficulties faced by industrial product makers were apparent in the inventories index, which rose 14.9% to 196.04 in November despite lower capacity utilisation.

The declines were a result of lower global demand as the world economy started to contract, Mr Arthit said.

Thai small and medium enterprises (SMEs) also expressed less confidence in their future in November.

According to the Office of Small and Medium Enterprise Promotion (Osmep), the Trade and Service Sentiment Index of the SMEs (TSSI) dropped to 42.5 in November from 43.3 in October.

The sentiment index of SMEs in retail and service businesses dropped to 41.8 and 43.1 from 44.0 and 43.5. Only the wholesale sector rose slightly, to 42.4 from 40.6, as operators expected higher sales in the festive season.

But SMEs' confidence in the domestic economy fell in November to 17.2 from 28.3, and the business well-being index dropped to 36.0 from 42.4.

The Osmep forecasts the index will improve slightly in the first quarter of next year to 47.7 on higher spending over the New Year holiday and Chinese New Year, which falls on Jan 26.