The Thailand Industry Sentiment Index (TISI) continued to decrease for the third consecutive month to 90 points in September, attributed to weak purchasing power, caused by lower income for farmers and high household debt amid the global economic slowdown, says the Federation of Thai Industries (FTI).
The indicator posted 91.3 points in August.
"Goods orders, sales and production volume all declined, which affected the TISI," said Kriengkrai Thiennukul, chairman of the FTI. "Only operating costs of factories appeared to improve in September."
Energy costs in the manufacturing and transport sectors were under control after the cabinet approved measures to reduce electricity bills and diesel prices last month.
The power tariff, which determines electricity bills, was reduced to 3.99 baht per kilowatt-hour (unit), down from 4.45 baht a unit. The new rate is applicable between September and December this year.
Authorities also agreed to cut the diesel excise tax to 3.67 baht per litre, down from 5.99 baht per litre. The reduction, combined with the diesel price subsidy programme, is meant to keep the domestic diesel price under 30 baht a litre from Sept 20 to Dec 31.
The measures led to a drop in operating costs in the industrial sector, said Mr Kriengkrai.
However, businesses are worried over increasing financial costs following the Bank of Thailand's decision to hike interest rates, he said.
The Monetary Policy Committee voted unanimously on Sept 27 to raise the policy rate by a quarter percentage point from 2.25% to 2.50%, effective immediately, the highest level since October 2013.
Commercial banks later announced they would increase both loan and deposit rates in response.
The FTI wants the government to ask the central bank, state-owned and commercial banks to monitor and carefully manage interest rates by keeping the gap between deposit and loan rates small, said Mr Kriengkrai.
He said the federation is upbeat about foreign investment after its executives joined Prime Minister Srettha Thavisin's entourage to visit China.
"The Chinese investment policy focuses on electric vehicles, renewable energy, digital and green businesses. This matches Thailand's bio-, circular and green economic development model," said Mr Kriengkrai.
The FTI earlier joined with China to establish the Thai-Chinese Economic and Investment Institute to facilitate investment among Chinese entrepreneurs in Thailand.