Thailand manufacturing sector contracts in April amid subdued demand

Thailand’s manufacturing sector contracted in April for the first time since November as growth in in new orders and production decelerated.

The Nikkei-Markit manufacturing purchasing managers’ index for Thailand came in at 49.8 in April, down from 50.2 in March and coming in below the 50-point line separating expansion from contraction.

Business conditions for the country’s manufacturing sector were described as “broadly stagnant” with business confidence remaining subdued.

Growth in new orders slowed to a five-month low amid soft client demand at the beginning of the second quarter, the survey found.

Thai factories shed more workers in April with lower employment reported for a third consecutive month. Survey respondents reported the first fall in backlogs for this year suggesting sufficient capacity to meet production needs.

Input costs rose although at a slower pace compared March. Companies said rising input prices were linked to higher raw material prices and higher import taxes.

Bernard Aw, economist at IHS Markt said:

Subdued client demand placed less pressure on operating capacity. In fact, Thai manufacturers indicated a decline in backlogs despite lower staff numbers, pointing towards the presence of excess capacity in the sector. Meanwhile, the stagnation in Thailand’s manufacturing sector was accompanied by an easing in inflationary pressures, with reports of slower increases in input costs and output prices. Moreover, there were signs that future output would remain subdued, with Thai goods producers signalling the lowest level of business confidence in the survey history.