Thailand: Title: Thailand manufacturing sector contracts amidst weakening demand
The S&P Global Thailand Manufacturing Purchasing Managers’ Index (PMI) fell to 45.3 in February from 46.7 in January, indicating a seventh successive monthly contraction in manufacturing sector conditions and at the sharpest pace since December. As a result, the index moved further below the 50.0 no-change threshold, and signaled a faster deterioration in manufacturing sector operating conditions compared to the previous month.
February’s deterioration primarily reflects a significant reduction in new orders, marking the third fastest decline on record. This downturn in demand has led manufacturers to work through existing orders, resulting in a depletion of backlogged work at a rapid pace. Additionally, there was a marginal increase in production, but firms reduced their purchasing activities and headcounts in response to the diminished demand.
On the pricing front, input cost inflation reached a ten-month high, driven by rising raw material costs. Despite this increase in costs, Thai manufacturers were reluctant to pass these higher costs onto clients, largely due to the prevailing weak demand. This cautious approach led to a lower output price inflation in February. Business sentiment in the manufacturing sector remained positive into the second month of 2023, but there was a slight decline in business confidence compared to January. This dip in confidence reflected the challenges faced by the sector in balancing cost pressures with the need to stimulate demand.