Bangkok Post

Thai consumer confidence has bounced back from its pandemic low

- THEERAPHOO­M VUTHIPRAMO­TE AND PREEYA CHATANON, ANALYST

The Thai consumer confidence climbed to 41.4 in September 2021 from a record low of 39.6 the previous month. Meanwhile, the consumer confidence economic sub-index also increased to 35.5 compared with 33.8 last month. The recovery was primarily driven by the lifting of lockdown restrictio­ns at the beginning of last month, which allowed a variety of businesses and services to reopen, including restaurant­s, parks and outdoor sports venues, and shopping malls.

The country recently registered less than 10,000 daily new confirmed COVID-19 cases since July 17. Moreover, approximat­ely 58.5 million vaccine doses have been distribute­d across the nation, covering 51% of the overall population and fully inoculatin­g more than 33%.

Looking ahead, the declining trend of COVID-19 infections, the rapidly growing vaccinatio­n rate, and the implementa­tion of tourism reopening programs are all expected to help boost consumer confidence in the coming months. However, a variety of negative factors, such as flooding, rising oil prices, and political turmoil, could derail the ongoing economic recovery, going forward.

Energy shortages

As the global economy recovers and winter approaches, energy prices have skyrockete­d. Natural gas prices, for example, have soared by more than 250% since January 2021. The reopening of the global economy over the last year has boosted energy demands. Gas shortages have been exacerbate­d by a spike in demand for liquefied natural gas from Asia, the United Kingdom, Europe, and the United States. As a result, some energy companies were being forced to switch from natural gas to oil and coal as a source of power, resulting in the usage of up to 2 million barrels of oil each day to substitute natural gas.

Over 130 petrol stations in the United Kingdom ran out of gasoline a week ago, while factory electricit­y prices in China are at an all-time high. Standard coal prices have reached $154.2 per ton, marking a record 20-year high. As a result, Chinese power companies realise that producing electricit­y from coal is no longer profitable, and they are unwilling to increase production to meet rising demand.

The severe COVID-19 epidemic and natural disasters wreaked havoc on the energy supply. Non-OPEC supply growth in 2021 has been cut by 0.19 million barrels per day due to Hurricane Ida’s impact on US supply growth, while oil output in Brazil and other non-OPEC nations has continued to miss the production target of -0.2 million barrels per day

OPEC and its allies, on the other hand, have been cautious of increasing oil supply for fear of driving down prices. They agreed to stick to a prior agreement to increase production by a modest 400,000 barrels per day. The group’s decision on supply was widely expected, though some had hoped that the shortage in the market would persuade the group to add to the supply. The internatio­nal benchmark Brent crude futures were trading over $80 per barrel after the meeting. Moreover, according to Bank of America, Brent crude prices might reach $100 per barrel by the end of this year.

Inflation tends to rise in line with rising oil prices because an increase in the cost of producing and transporti­ng goods. Energy price-driven inflation will adversely impact economies around the world. Many emerging economies that are still hurting from the COVID-related sluggish growth environmen­t will see rising inflation adding to their fiscal burdens.

Container Shortages will add to inflation woes

Over the past two years, the global imbalance in container distributi­on has intensifie­d. Businesses in major Asian exporting countries are having difficulty finding containers for their goods, while empty containers are piling at ports in the United States, Europe, and Australia, delaying their return to Asia and other exporting countries.

Aside from an unexpected­ly rapid recovery in demand, supply chain disruption­s caused by labor shortages, equipment constraint­s, and a lack of coordinati­on throughout the shipping industry have worsened the situation of container shortages.

Although a 40-foot container from Shanghai to New York costs $10,129 this week, a 2.2% decline from the previous week, it is still well above the 5-year average of $2,672. The container prices decline following the drop in supply due to power outages in China , prompting the temporary closure of its industrial manufactur­ing hubs last week.

The slowdown in rising prices, however, does not ensure that the trend will continue in 2022. The US’s retailers with low stocks will have to continue sending goods to refill after the Christmas rush. A further drop in container prices could spark more retailers to resume shipping, pushing up prices again. According to industry analysts, the container constraint has been the most significan­t problem in trading and will persist for the coming year.

The significan­t disruption in global supply chains raises inflation further due to higher trading costs and aversion to the festive season's run-up, encouragin­g retailers and consumers to stockpile consumer products.

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