Thailand exports slip 1.6%

Good news is that real GDP still inched higher by 4.2% despite the drag in exports.

According to Nomura, real GDP grew by a stronger-than-expected 4.2% y-o-y in Q2 from an upwardly revised 0.4% in Q. On a seasonally adjusted (sa) basis, GDP was up 3.3% q-o-q (sa) in Q2, slowing from 10.8% in Q1. The print would have been a positive surprise for both the Bank of Thailand and the Ministry of Finance, which had expected growth of 3.5% and below 3%, respectively.

Here's more from Nomura:

On the demand side, growth was largely supported by domestic demand, even as net exports remain a drag.
Investment growth increased by 10.2% y-o-y in Q2 from 5.2% in Q1, as both private (11.8%y-o-y in Q2 from 9.2% in Q1) and
public (4.0% in Q2 from -9.6% in Q1) investment expanded. Similarly, private and public consumption also rose, by 5.3% and
5.6% in Q2, from 2.9% and -0.2% in Q1, respectively. Domestic demand contributed 5.7 percentage points (pp) to headline GDP growth while the contribution of inventories remained positive at 2.8 pp (from 2.9pp in Q1).

We believe that reconstruction spending as well as pent-up demand following the devastating floods late last year were the main factors driving domestic demand. In line with stronger investments and robust domestic demand, goods imports increased by 8.8% y-o-y in Q2, from 4.3% in Q1.

Exports of goods, however, remained weak despite improving, falling by 1.6% y-o-y in Q2 from -5.0% in Q1. As a result, net
exports remained a drag on headline GDP growth (-4.4pp in Q2 from -4.7pp in Q1).

On the supply side, the agricultural sector grew 1.3% y-o-y in Q2, slowing from 3.4% in Q1, while non-agricultural sector growth accelerated by 4.5% y-o-y from 0.1% in Q1, driven by strong growth in the electricity, gas and water supply (11.7%), hotel and restaurants (8.4%) and transportation (7.4%) sectors.