Factory output in Thailand rose for the first time since severe flooding devastated industry late last year, but economists said the central bank was likely to continue supporting the recovery in the face of the weakening global economic outlook.
Output grew 5.53 percent in May from a year earlier, more than double the 2.5 percent expected by analysts in a Reuters poll. April’s output was revised down to show a small fall of 0.06 percent from a 0.54 percent rise.
On a monthly basis, output jumped 13.79 percent in May after a revised 14.35 percent fall in April.
The Industry Ministry said the improvement was helped by the recovery in key industries, particularly the auto sector, plus a low comparitive base last year after a severe earthquake and tsunami in Japan disrupted global supply chains.
“We expect most industries to resume normal production in the third quarter, except some sectors that have technical problems,” Sophon Pholprasit, director general of the ministry’s Office of Industrial Economics, told a briefing.
He said about 80-90 percent of the industrial sector had recovered, with the car sector fully operating. But hard disk drives and electronics might not get back to normal until early in the fourth quarter.
Car production surged 136 percent in May from a year earlier, beer production rose 46.26 percent and air conditioners and parts 19.4 percent. But output of electronics fell 29.4 percent and textiles dropped 21.7 percent.
The floods had hit auto and electronics firms the hardest, many of whom are big exporters. Thailand is a regional hub and export base for the world’s top car producers and the world’s number two maker of hard disk drives.
Sophon said the ministry still believed factory output would rise 6-7 percent this year after a 9.3 percent fall last year due to the floods.
WEAK GLOBAL DEMAND
Usara Wilaipich, an economist of Standard Chartered, said the recovery in factory output might not continue in the long term because industries had resumed production mainly to cater to pending orders after the floods.
“Once these orders are completed, exports and manufacturing output may not be able to sustain momentum amid weak global demand and a downside risk in Europe,” she said.
Customs data showed annual exports rose a much bigger-than-expected 7.68 percent in May, after a 3.7 percent fall in April, as demand from big markets was higher. Industrial goods account for about 65 percent of total shipments..
Exports to the United States rose 10.9 percent in May from a year before, with those to the euro zone up 6.8 percent, to Japan up 5.0 percent and to China up 22.3 percent. Each roughly accounts for one-tenth of the country’s total shipments..
Thailand’s Asian neighbours have all seen weakness in shipments to debt-stricken Europe in recent months and to China. Though exports to the United States have been somewhat stronger than expected, recent data point to that economy losing some momentum as well.
Thailand’s central bank recently said exports may grow just 8 percent this year, rather than the 9.2 percent forecast last month. But the Commerce Ministry still expects a 15 percent increase this year, after a 16.4 percent rise in 2011.
Despite a robust first quarter, the Bank of Thailand is sticking to its GDP growth forecast of 6.0 percent for 2012 as exports are likely to slow later in the year on weak global demand..
The central bank left its policy interest rate unchanged at 3.0 percent for a third straight meeting this month after two cuts in November and January to help the economy recover from the floods that slashed growth down to just 0.1 percent in 2011..
Most economists expect the central bank to stand pat for the rest of the year as domestic factors remain strong, while although the central bank has said there is room to ease monetary policy if global events severely impact on the Thai economy. Its next scheduled policy review is on July 25.