Thailand's Manufacturing Index Shrinks 3.1% in June

The Office of Industrial Economics (OIE) announced on July 27, 2024, that June's Manufacturing Production Index stood at 94.99, a 3.1% contraction from the same period last year, with production capacity utilization at 57.61%. The second quarter of 2024 registered 95.96, down 1.79%, primarily due to weakness in automotive and petroleum industries compounded by prolonged Middle East tensions, which have created volatility in energy prices and shipping costs.

However, the index retained support from recovering domestic demand, particularly in consumer and essential goods such as sugar, cleaning products, soap, and cosmetics, buoyed by government stimulus measures under the Thai Help Thai Plus program. Industries responding to changing consumer behavior also performed well, including pet food manufacturing driven by the trend of treating pets as family members, and prepared food products aligned with urban lifestyles. The textile industry also received a boost from the FIFA World Cup, increasing demand for sportswear.

For July 2024, the MPI outlook appears normal despite renewed Middle East tensions affecting production costs, shipping, and international trade. Thai industry is expected to benefit from domestic stimulus programs continuing to drive consumption. Officials warned of risks from the prolonged Middle East conflict and uncertainty surrounding U.S. tariff policies, while noting positive demand for electronics and technology-related products.

Manufacturers are advised to strengthen supply chain risk management by diversifying raw material sources and export markets, reducing dependence on any single country or region. Recommendations include using forward contracts to manage costs, improving production efficiency and energy use, promoting renewable and biomass energy, adopting digital technology and AI to reduce waste, and developing workforce skills.