THAILAND: Trade Uncertainty Weighs On Consumer Confidence
February consumer confidence eased to 57.8 from 59.0 but the Q1 average remains above Q4 by 1.5 points at 58.4. The economic component was also lower last month falling to 51.5 from 52.6. The Q1 averages signal that private consumption growth should have continued around Q4’s 3.4% y/y pace or even picked up a bit supported by government policy. However, the outlook may not be as positive as it appears that global uncertainty driven by increased protectionism is weighing on sentiment and that trend is likely to continue for now given recent US steel and aluminium tariffs and counter measures.
Thailand consumption
Source: MNI - Market News/Refinitiv
- Thailand is highly vulnerable to a global trade war with around 20% of its 2024 exports going to the US worth over 11% of GDP and 12.7% to China worth around 7% of GDP. It could also be a target of US reciprocal tariffs scheduled for April 2, as Thailand’s average MFN rate is over 6.5pp higher than the US’.
- The University of the Thai Chamber of Commerce also gave domestic political uncertainty as a reason for the first decline since September. But the government’s plans to hand out THB 10k to each of 2.7mn people between 16 and 20 years may offset this effect going forward.
- Despite heightened uncertainty, tourist arrivals have strengthened with the annual growth rate rising to 22.2% in January up from 11.2%. This should also support consumption. Tourism could increase further following the Thai PMs trip to China and the government’s plans to support the sector to achieve its goal of 3% growth.
Thailand tourism
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EUROZONE: Unlikely To Face A Recession In 2025 But Risk Of Trade/Energy Shocks
Q4 GDP data showed that growth remained weak in the euro area at the end of 2024 and rising natural gas prices from a cold winter and the end to Russian pipeline flows through Ukraine are likely to weigh on already disappointing growth. Despite falling German activity, our January estimate of the recession probability 6-months ahead remained close to zero. The euro area remains vulnerable to trade and energy shocks though, which aren’t modelled.
- The euro area was flat on the quarter in Q4 to be up 0.9% y/y, while Germany continues alternating between positive and negative falling 0.2% q/q in Q4 to be down 0.2% y/y.
- The region is yet to face a universal tariff from the US, but President Trump has said it won’t escape. The US had a $235.6bn visible trade deficit with the EU in 2024 and 18.6% of its imports came from the group.
- Our estimate from 1985, which includes four recessionary episodes, has had no probability of a euro area recession 6-months ahead for over a year. The one from 1998 with three recessions has dropped to around 9% in January from 31% in June, the 2024 peak, and 64% in September 2023. The ECB began easing in June last year.
- Real oil prices, M3 growth and the change in unemployment are adding upward pressure on the recession probability, while the real repo rate, real exchange rate, economic sentiment and the yield curve are providing downward pressure. Real equities have been neutral.
- It is worth noting that econometric calculations are just estimates and not a projection.
Euro area recession probability 6-months ahead estimate
ASIA STOCKS: Tariff Headlines Continue to Dominate, Most Markets Weaker.
- China’s major bourses were lower today as President Trump signing tariffs on steel and aluminium imports as he indicated that autos, chips and pharmaceuticals were next in his sights.
- The Hang Seng lead the way lower down -0.59%, with the CSI 300 down -0.36%, Shanghai Comp down -0.16% and Shenzhen down -0.31%
- Taiwan’s TAIEX bucked the trend rising +0.20% today.
- South East Asian bourses followed a similar trend with Malaysia’s FTSE KLCI down marginally by 0.06% and the Jakarta Composite continued its poor run down -1.50%, to be down for a fifth successive day of trading.
- As Indian markets get going on their trading day the NIFTY 50 is opening very weak, down -0.45% in what could be a fifth successive day of declines.
- Korea however is bucking this trend as discussions in parliament centre around a special budget to stimulate growth in the ailing economy. Yesterday the opposition proposed the idea of an additional budget and the ruling People’s Party said today, it does not oppose the idea.
- The KOSPI is a regional bright spot today up +0.83%
INDONESIA: Consumer Confidence Remains Elevated Signalling Solid Spending
Indonesia’s consumer confidence was slightly lower in January at 127.2 after 127.7 but it printed above the Q4 average of 124.9 and remains at a solid level and in line with continued robust private consumption growth of around 5%, where it was in Q4, or even higher.
- Bank Indonesia unexpectedly cut rates 25bp to 5.75% in January and continues to support the economy with macroprudential policies. It is unlikely to cut again on February 19, especially given USDIDR is above 16300, but there is likely to be further easing to support growth before mid-year.
- The government is working to boost household spending by scaling back proposed VAT increases to only luxury goods, introducing a temporary 50% discount on electricity tariffs in January and February, free school meals and rice distribution. The budget deficit is likely to be narrower than in 2024 though.
- USDIDR is up 0.2% today to 16372 following US President Trump signing the order for tariffs on all US imports of steel and aluminium. The pair is up 0.3% since the January 15 BI decision but off the February 3 high of 16471. Also, the February average of the JP Morgan NEER is down 1.1% m/m with the index now 2.1% lower on a year ago. Thus, BI is likely to focus again on rupiah stability this month.
Indonesia consumer confidence vs real consumption y/y%
