Bankruptcies rose 6,5% in october

The Commerce Ministry showed on Thursday that a total of 1,516 companies shut down their business in October, an increase of 6.54 per cent from the same period last year. Most of the companies are in the construction, property development and electrical appliance distribution industries.

In the same month, 3,695 companies were registered, up 4.92 per cent year on year of 152 companies. Most of the newly-registered companies are in construction, property development and services sectors.

He also noted that the number of shutdown companies is a jigsaw that reflects the economic conditions. “These companies shut down their business a year before they came to officially withdraw the company registration with the department.” (Nation)

Understand : there is time lag effect… Therefore, it’s likely that the number will continue to increase in the coming months… “reflecting the economic conditions“…

“Recovery of consumption in Q3″ : debunking the boiling room

Here is a good example of propaganda, of what I call the “boiling room” syndrom : misinterpretations of datas, false extrapolations, mix of comparisons in percentages and values and mix of periods… in order to “spin”, to “boil” the economic situation.

At least, its apparences. Its face, as a thai would rather say.

For the demonstration, I will take an article published today by Nation, based on a report of the Fiscal Policy Office.

Ready ? Fasten your seatbelt.

First, the baseline (the mantra) : “Consumption is recovering, as revealed by several indicators.”
Sir, yes sir.

” According to the monthly economic report, collection of value-added tax in real terms expanded by 3.1 per cent year on year compared with 0.7-per-cent growth in the previous quarter.”
Totally idiotic. Base effect. Q3 2006 was really bad. So naturally, Q3 2007 looks better, year on year in percentage.

But actually, if we look at the amounts, in value : Q2 of this year = 109,94 billions THB. And Q3 = 109,96 billion. Now, that’s an impressive hike…

Furthermore, imports also count for VAT revenues. Exports and imports in august and september were strong, so it’s normal that VAT is going up (keep in mind that a lot of exports use imported parts and materials).
VAT is not automatically a sign of private consumption.

“Sales of cars also increased by 2.3 per cent year on year, compared with a sales drop in the three previous consecutive quarters. Car sales in September, however, dropped by 2.1 per cent.“
Base effect again, Q3 last year was bad. If we look the figures : Q3 2006 = 44 676 cars. Q4 = 52 602 cars. Q1 2007= 37 522. Q2 = 45 567. Q3 = 45 700. So, 150 cars more than Q2… Nice score. Nice trend.
And another blow : they tell us that the negative trend is back in september…

“Sales of motorcycles still faced a decline of 23.2 per cent, following a sales contraction for four consecutive quarters. This indicated that consumption is recovering in bigger cities but remains weak in rural areas.“
Amazing statement ! A staggering proof of recovery indeed : a sharp drop in motobikes sales. But the spin doctors have an answer for everything : the situation is “better” in Bangkok, where… obviously houselholds have more money to spend.

It’s like to say : “the recovery is here, because the rich people can buy…more“.

“Imports of consumer goods in terms of volume rose by 17.6 per cent, compared with a growth rate of 17.5 per cent in the second quarter.“
Amazing recovery. From 17,5 to… 17,6 %. Absurd.
By the way you will notice : no year on year comparison anymore.

“The Consumer Confidence Index in the third quarter was 69.7, suggesting confidence remained weak.”
And the final blow, like the “bouquet final” of a fireworks : consumption is “recovering“. But consumer confidence “remains weak”.
Indeed (read here).

See you in Q4 folks. With oil, inflation on fire, and the so called “miracle elections” of december, exports under threat (low USD and lower demand in the US and Japan). it’s going to be jumpy…

You’ll find here, all my charts (some of them cover GDP, private consumption, sales of cars etc.).

Car industry : sales from january to september drop 7,6 %

“Weak domestic demand has resulted in a 7.6 per cent annualised drop in auto sales during the first nine months of this year, with the total sale of only 451,326 units, according to the data compiled by Tri Petch Isuzu Sales Co Ltd.

According to Tri Petch, amid economic and political uncertainties, consumers in September still delayed their purchases despite special campaigns from all auto companies. In the month, the number of sold vehicles also dropped 1.24 per cent from the previous month. Only 53,491 units were sold in September.” (Nation)

This stat covers passenger cars and pick up trucks. The Bank Of Thailand has monthly statistics on passenger cars (here).

FDI : -32 % on the first semester

It’s check bill time… Despite the buzz, despite the boiling room, the figures have often the last word…

BOT said yesterday that Foreign Direct Investments in Thailand felt by 32 % during the first semester, compare to the same period of 2006.

“Foreign investment, in the form of equity investment and joint ventures with Thai companies in the manufacturing sector, totalled 170 billion baht in the first six months of the year, or 32% below the same period in 2006.

Japan remained the largest foreign investor in the first half, with inflows of 54.78 billion baht, or 33% of total foreign inflows. Ranked second was Singapore, at 25.16 billion baht worth of investment in the first half of the year, or 15% of the total, followed by the United States at 21.6 billion, or 13% of total investment.” (Bangkok Post)

Exports and business confidence : up in august

Surprisingly, we received 2 good news last week :

-”Thai business confidence in August edged up from a four-year low on easing political uncertainty, marking the first increase in three months, a survey showed Friday. The confidence index rose to 76.0 from 72.7 in July, the Federation of Thai Industries said in a monthly survey.” (Forbes)

-and… exports went up 17,9 % in august, year on year, at 13,91 billions USD (historic high in USD value) ! (Nation)

Despite the fact that on september 5, Finance Ministry’s Custom Department said : “The exports in August rose only 6 per cent year on year, a continue slowdown from July’s growth of 5.9 per cent.“

Explanation : “Chavalit Sethameteekul, director-general of the Customs Department, said the re-export of two nuclear reactors – each worth about Bt10 billion – had also taken place in August. Moreover, several trade invoices were collected late in the month, so the actual export figures were significantly better than his previously announced 6-per-cent year-on-year growth, he added.“

It’s interesting to note that : “Sales to the United States fell by 7.9 per cent, the fourth straight monthly decline due to the weakening economy there. Exports to the US were down 2.7 per cent in the first eight months”

Exports in august 2006 were 11,72 billions USD. The difference bewteen a growth of 6 % and a growth of 17,9 % equals 1,39 billions USD (48,8 billions THB). That’s a big difference…

And what is this story about “re-export of 2 nuclear reactors” ? What are they talking about ?

When the BOT will publish the details of exports figures (end of september) we will be able to have a better view of the situation.

Consumer Confidence : lowest level in august

Month after month… the same story.

“Consumer confidence index in August hit lowest level
Thailand’s consumer confidence index in August plunged to 75.7 points, the lowest level in 67 months, on concerns of stronger baht and declining economy, according to the survey by University of the Thai Chamber of Commerce, which was released on Thursday.
However, the consumers are upbeat about the improving economic situation after the general election in December.” (Nation)

Of course they are.

New and re-entry NPLs rise in Q2

“Borrowers are apparently losing their ability to pay debts, as reflected in significant increases in both new and re-entry non-performing loans (NPLs) in the second quarter of the year.

Gross NPLs rose by Bt97.25 billion, higher than the increase of Bt78.62 billion in the first quarter. The jump was particularly sharp in the manufacturing, commerce, personal consumption and service sectors, according to the Bank of Thailand.

In the second quarter, new NPLs rose by Bt63.97 billion, compared with an increase of Bt39.17 billion in the first quarter. The rise of re-entry NPLs was Bt24.25 billion, higher than the Bt16.79-billion jump in the previous quarter.” (Nation)

…And household debt goes up : “historic high in august”

Another side of the story.

“Household debt historic high in August
Thailand’s household debt increased to a historic record high of 31.23 per cent in August, following the economic slowdown, which prompted people to borrow more.

The “Chamber Business Poll” reported on Thursday that the household debt surged 13.2 per cent on the yearly basis to Bt132,262 per household in August.

Thanawat Phonwichai, director of Economic and Business Forecasting Centre of Thai Chamber of Commerce University, said the figure reflects the household’s acute shortage of cash flow, due mainly to the economic downward trend.“
The Nation

Comment : savings down, debts up… It’s becoming pathetic to assert that private consumption will save the… “Private Ryan Exports” (read here).

Such a state of denial is becoming really embarrassing for the thai authorities.