Passenger vehicle sales in Thailand grew 11% in August

The sharp rise in vehicle sales in August points to continued normalization in production from the supply-chain disruptions following the natural disasters in Japan. This should support third quarter GDP growth even as sentiment has been hit by global growth uncertainties. Passenger vehicle sales grew by 11% (MoM, sa) in August taking the year-on-year rate of growth to 25% from -15% in May.

Sales have now clawed back almost all the drop related to Japan with July-Aug sales up by 110% (QoQ, saar) over average second quarter levels. The auto sector makes up 6% of the Manufacturing index (2000 weight) and as manufacturing makes up 40% of the economy, the auto sector accounts for about 2.5% of GDP. To the extent that sector has outperformed over the past decade, the weight of the sector is probably higher than the 2000 estimate thus making it a lower bound estimate.

The sequential growth in the auto sector alone would have added 2.5% (QoQ, saar) to second quarter output. We will get a clearer picture of second quarter GDP with the release of August exports data this week and production data next week. Going by the trends in vehicle sales and exports out of North Asia in August, exports were probably strong in August.

Export growth of 30% (YoY) (or a contraction of 4% MoM, sa) appears probable, not far from consensus estimates of 28% YoY and Jan-July average of 25% (YoY). Beyond the third quarter, the new government’s slew of expansionary policies will support growth though inflation will become a serious risk especially if the proposed 40% hikes to civil servants’ salaries are implemented (10 year average annual increase in wages: 3.5%).