Thailand’s export growth beats market expectations at 31%

Trade report for August, out yesterday, painted a picture of continued strength in the external sector. Exports grew by 31% (YoY) close to our expectations of 30% and above market expectations of 27%. Import growth significantly beat our and market forecasts of 25% and came in at 44% (YoY). The trade balance registered an unusual deficit of USD 1bn against where it usually registers surpluses of similar size. In sequential terms, exports fell by 4% (MoM, sa), not much of a payback for the strength in earlier months. Imports grew by 20% (MoM, sa), driven by both oil and nonoil import growth.

While there seems to be some degree of overshoot in oil and non-oil imports, the import strength does bring imports more in line with the stronger exports and points to possible inventory re-building underway. Further supporting this thesis is strong growth in intermediate imports (50% YoY). As we have mentioned often in this space, manufacturing production has lagged exports this year pointing to either an imminent and large drop in exports or an imminent and large rise in production.

A combination of the two is probable and according to our calculations implies a strong pick up in manufacturing production and hence GDP in 3Q. The August trade data certainly supports this view and suggests a strong sequential pick up in production data out next week. Of course, it remains to be seen how weakening global sentiment hurt the economy, and we may have to wait for September data to see that.