May 28, 2012 / 7:26 AM / 7 years ago

UPDATE 1-Thai factory output rises for first time since floods

(Adds details, economist’s comment, unemployment rate)

* April output +0.54 pct y/y vs f’cast +2.8 pct

* First annual rise since severe flooding in late 2011

* Annual output -5.24 pct in first 4 months of year

* Economists expect no change in policy rate at June meeting

By Orathai Sriring and Boontiwa Wichakul

BANGKOK, May 28 (Reuters) - Factory output in Thailand rose in April for the first time since severe flooding disrupted industry late last year, but economists said interest rates would continue to be held down to support the recovery in the face of slowing global demand.

Output edged up 0.54 percent in April from a year before, sharply below the 2.8 percent forecast in a Reuters poll. March’s output was revised to a 2.69 percent fall.

Output fell 13.84 percent in April from the previous month, but the Industry Ministry said that was because of the large number of holidays during April..

“The main sectors hit by the floods have recovered steadily, particularly the car industry, which helped push overall production higher for the first since the flood crisis,” Aphiwat Asamaporn, deputy director general of the ministry’s Office of Industrial Economics, told a briefing.

“Output should continue to rise further and we expect to see growth in the second quarter,” he said, noting volatile energy prices and problems in Europe as the main risks.

Car production surged 83.12 percent in April from a year earlier, when it was hit by the tsunami in Japan. Output of air conditioners and parts rose 13.8 percent and beer 8.2 percent.

The floods had badly hit car and electronics firms, many of whom are big exporters. Thailand is a regional hub for the world’s top car producers and the world’s second-biggest maker of hard disk drives.

At least 72 percent of the 839 affected firms are up and running again, and the authorities say they expect production to fully recover by June. The Industry Ministry has forecast output would rise 6-7 percent this year after a 9.3 percent fall in 2011.

Unemployment remained low at 0.73 percent in the first quarter of 2012, compared with 0.83 percent a year before and 0.6 percent in the previous three months, as workers returned to work after the floods. Real wages rose 11.4 percent in the first quarter from a year before, according to the National Economic and Social Development Board (NESDB).


Despite the improvement, industrial output will probably remain below par in coming months, weighing on exports as industrial goods account for about 65 percent of shipments.

Customs data on Friday showed exports fell 3.7 percent in April from a year before due to the lingering impact of the floods and sputtering demand from the euro zone. .

“Weak April export numbers coupled with the trickle of sluggish external sector and production data from the region also point towards a more gradual than estimated recovery in Thai production activity, though it will find some support from reconstruction due to last year’s floods,” said Radhika Rao, an economist at Forecast in Singapore.

She believed the Bank of Thailand would leave interest rates on hold for some time although a rise in inflationary risks meant there was a chance of an increase late in the year.

The central bank cut its benchmark rate twice during the floods to help the economy, then left it unchanged at 3 percent at its last two meetings. Most economists expect no change in the rate at the next review on June 13.

The Commerce Ministry expects exports to grow 15 percent this year. The central bank predicts just 9.2 percent and has said global economic problems would be a drag. Exports rose 16.4 percent in 2011.

After economic growth of just 0.1 percent in 2011 due to the floods, the central bank has forecast 6.0 percent in 2012, or even higher after a strong first quarter, when there was record growth of 11 percent from the previous quarter.

The NESDB, which compiles the GDP data, predicts growth of 5.5-6.5 percent. (Additional reporting by Kitiphong Thaichareon; Editing by Alan Raybould)

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