MPI expected to recover in second half

The manufacturing production index (MPI) is expected to start recovering by the second half of the year because of the government’s pledge to inject more money into the economy via investment projects at a time when the global economy is about to improve, says the Office of Industrial Economics (OIE).

The index dropped 1.3% in January, compared with -5.6% in the same period last year, with manufacturing in major sectors showing signs of recovery, said OIE director-general Udom Wongviwatchai.

He said although the total i ndex in January remained in negative territory, the electronics, garment, food and automotive sectors have shown improved performances.

“We are confident that growth in manufacturing will occur in the second half of this year. The recovery will be faster in sectors whose stimulus programmes are about to be kicked off,” he said.

Although state megaprojects have not yet started, the clear policy of the government to stimulate the economy has already had a positive impact on the MPI, Mr Udom said.

He added that the import of raw materials for manufactured goods dropped 2.5% in January, due largely to seasonal production adjustments. However, imports of capital goods such as computers and parts grew by 1.7%.

The number of applications to the Board of Investment has risen substantially, signalling an increase in spending by the manufacturing sector over the next few months, Mr Udom said.

In January, automotive production grew 2.3% from the same period last year to 166,400 vehicles thanks to increasing demand in Asia, the Middle East and Oceania.

In contrast, domestic sales declined by 12.8% due to slow government economic stimulus plans at a time when household spending contracted.

Production of electronics and appliances declined 6.95% due to a fall in output in some sectors such as hard disk drives. Demand for appliances such as air conditioners fell due to weak economies in Europe and Japan as well as political unrest in the Middle East, a major importer of air conditioners.

However, production of semiconductors and integrated circuits increased thanks to strong demand from the telecommunication devices sector, which rose in line with the recovering economy in the US.

Production of steel also improved due to rising demand from private sector construction firms, especially for outbound condominiums. That helped offset weak demand from the government, which has yet to start any major infrastructure projects.

In addition, production in the food sector increased thanks to increasing demand in the US.