Thailand: Flurry of factors combine to dent retail sentiment

Retail sentiment remains tepid as operators fret over rising inflation, an interest rate hike and an increase in the daily minimum wage bound to raise their production costs.

Based on the latest market survey conducted during Aug 17-26 by the Thai Retailers Association and the Bank of Thailand, the Retail Sentiment Index stayed unchanged from July at 56 points.

“Although positive signs have emerged now that consumers have more confidence to spend as usual in their daily lives following the continued easing of the government’s Covid-19 measures and an increase in international tourist arrivals, retailers are still concerned about the high inflation rate, a rise in the domestic interest rate and increases in the daily minimum wage,” said Chatrchai Tuongratanaphan, the association’s vice-president.

“Moreover, people’s spending per bill in August dropped, though the frequency of shopping slightly increased. Sales of same-store growth also declined from July. This reflects weak consumer spending power, mainly attributed to relatively high household debt and low income.”

Labour Minister Suchart Chomklin said Tuesday his ministry is scheduled to forward the increases in the daily minimum wage as approved by the national wage committee to the cabinet for approval on Sept 13 so that the increases can take effect on Oct 1.

The national wage committee finalised on Aug 26 increases in the daily minimum wage that average 5.02%. The new rates include a hike of 22 baht in Bangkok and its surrounding provinces.

However, Mr Chatrchai said the association expects the retail sentiment to improve slightly over the next three months, which are the annual high season for tourism, while customer traffic recovers at retail stores.

“The retail business recovery will take time as many business operators are still worried about continuous increases in production costs and rising product prices,” he said.

Based on the survey, the majority (40%) of retail operators expect product prices will be adjusted by another 5% in the remaining months of this year, 17% of them anticipate product prices will be raised by 5-10%, 12% expect prices will be adjusted by more than 15%, and 5% forecast the prices will increase by 11-15%.

Only 26% of retailers expect product prices will not be increased.

The overall market is still full of negative factors impeding the retail market’s recovery over the next three months, according to the association. Up to 70% of retailers think rising inflation will lead the prices of overall products to increase, while 9% and 7% of retailers are concerned about interest rate hikes and labour shortages, respectively.