Thailand’s manufacturing production surges 7% in August

Manufacturing production rose sharply in August in line with our expectation for the long overdue catch-up in production to the much stronger exports. Data out yesterday showed production registered growth of 7% YoY, much better than consensus expectations for 4% YoY growth and beating our 6% forecast. In sequential terms, production grew by 4% MoM even as output for July was revised up by 1%-point. Even if output is flat in September, production will be up by 14% annualized in 3Q, pointing to a strong 3Q GDP.

The breakdown revealed improvement in motor vehicle production played a big role (still recovering from the hit from Japan), followed by pick up in food and petroleum sectors. We have already penciled in a contraction of 8% in 3Q real GDP exports mainly as a payback for the strong early year growth.

Despite that, and even after the rise in August production, a gap of 8% likely remains between exports and production. Barring a sharp sentiment-led fall-off in exports in September and October (cannot be ruled out given global market sentiment), production appears set to maintain this strong momentum for a couple more months. With that, GDP growth too could come in closer to our forecast of 4.6% than the current sub- 4% consensus.