Thailand Manufacturing Activity Accelerates in June 2017

The Bank of Thailand is expecting economic growth to pick up in 2017 with improved domestic and external demand. 2H17 economic growth is expected to outperform 1H17 growth, according to a senior official of the Bank of Thailand. Improved demand is likely to support manufacturing activity in Thailand (EEM) in 2017.

The Nikkei Manufacturing PMI in Thailand (EEMA) rose to 50.4 in June 2017 as compared to 49.7 in May 2017. Let’s look at manufacturing PMI over the last year in Thailand in the below chart.

Thailand’s manufacturing PMI in June 2017 saw its first expansion since March 2017. The output, new orders, and new export orders increased at a faster pace in the last two months amid improving business confidence in June 2017.

The manufacturing sector moved into expansion territory in June 2017 as the manufacturing PMI increased above the critical 50 mark. However, the degree of improvement remained marginal in June 2017. The growth in the new business volume picked up specifically from overseas markets (ACWI). The increased sales volume lifted the production activity in June 2017.

Purchasing activity has also increased, but at a slower pace, for the past seven months. Employment remained stagnant despite increased demand. On the cost front, the price pressures remained low as input costs grew at a slower pace resulting in the steady rise in output prices.

Manufacturers in Thailand remained optimistic about the next-12-month period in line with its growth in orders. The expectations of improved growth in exports, new product launches, and higher sales forecasts supported confidence levels.

Thailand (THD) has the second highest exposure of about 22% in the FTSE Southeast Asia ETF (ASEA). The ASEA, which tracks Southeast Asian equities, has risen about 1% in June 2017. So far it has risen about 19% in 2017 as of July 12, 2017.