Hopes escalate for a spike in Thailand's manufacturing output

Growth is foreseen to push to 33%.

According to DBS, manufacturing output was very encouraging in November and there are hopes that this momentum will carry over into December. 

Notably, the value of production index (VAPI) had a sizable bounce in the machinery & equipment and office & computer machinery components.

Moreover, output for motor vehicles also stayed elevated due in part to the first car owner rebate scheme that was in place last year.

Here's more from DBS:

The disappointing custom export data may not have much of an impact on manufacturing output. Against, consensus expectation of a 21.5% YoY increase in December, the figure came in at a much lower 13.4%, dragged down by a drop in food exports (unrelated to manufacturing).

As such, we expect manufacturing growth to reach 33% YoY in December, driven in part by favorable base effects.

The inflation data point for January will reflect the increase in daily minimum wage to THB 300/day and will be keenly watched. Through administrative measures and corporate tax cuts, the authorities managed inflation effectively following a hike in minimum wage in April last year.

The lingering impact of sin taxes implemented late last year will also continue to push up headline inflation. In our opinion, inflationary pressures are starting to build and will continue to do so when the planned flood-related infrastructure spending kicks in.

All these come on top of existing consumption stimulus and point to a higher average inflation rate compared to 2012’s 3%. For January, headline inflation is expected to be unchanged at 3.6% YoY.