The consumer confidence index (CCI) fell for the third straight month to the lowest in seven months in July as recent flooding and persistent poor farm prices caused rising concerns over weak purchasing power and economic uncertainty.
University of Thai Chamber of Commerce vice-president for research Thanavath Phonvichai said the July consumer confidence index declined to 73.9, down from 74.9 in June and 76 in May.
He said the recent flooding was another negative factor that was taken into account during late July. It played a major role in reducing confidence among consumers and further stressed persistent concerns about weak buying power.
"The flood itself was not a major concern, but it hit northeastern cities when farm product prices have been consistently weak, making consumers worry about further falls in income," said Mr Thanavath.
Other negative factors that still weigh on the CCI are business concerns about rising labour costs as the government delayed the implementation of a new Royal Decree on Recruitment of Foreigners that could lead to possible labour shortages.
Although Prime Minister Prayut Chan-o-cha has invoked Section 44 to postpone the implementation of the law for six months, investors were unsure about how to react to the changes, which impose harsher penalties for illegal employment of foreign labour, he said.
Uncertainty about the new law prompted many migrant workers to flee Thailand and return to their home countries, with no certainty about whether they would come back, since neighbouring economies are growing rapidly and need workers.
However, there are some positive factors that helped prevent the CCI from falling further, including the National Economic and Social Development Board (NESDB) raising the 2017 GDP forecast to 3.5%, up from 3.4%.
Another positive factor was the Bank of Thailand's Monetary Policy Committee (MPC) decision to keep the policy interest rate unchanged at 1.5%, while hefty exports in the first half of the year also lent support to the CCI in July. The Commerce Ministry announced that June exports grew 11.7% year-on-year to US$20.3 billion (675 billion baht). It was the second consecutive month that Thai exports saw double-digit growth after a 13.2% leap in May.
The government and the Thai National Shippers' Council are more confident that 2017 annual exports will grow 5%.