Monthly Economic Insight June 2021

Strong outlook in both manufacturing and service sectors in countries which have Covid 19 under control such as United States and European countries . Reopening in US and Europe advanced positive outlook in service sector further.
Returning global demands help support global exports. Asian economies benefit from returning global demands through manufacturing and exports.
Inflation on the rise due to energy price. The rising inflation should be transitory. Energy and transportation prices which had low bases last year contributed to higher inflation in the United States.
U.S. labor market displayed moderate improvement in May, adding 560,000 jobs. Meanwhile, European retail trade and industrial production increased strongly in April from low base impact.
Chinese economy continued its growth from the first quarter. Producer price rose significantly. Japan might struggle from weak domestic consumption

Overall, Thai economy declined in April 21 after a hit of third wave of domestic outbreak.
External sectors (except international travelling) continued its recovery trend. Merchandise exports excluded gold steadily recovered in all destination countries. Foreign tourists were at very low level, with a slight improvement in special tourist groups.
Domestic activities plummeted to nearly the same level as in the 1 st round last year.
- Private consumption declined together with worsen consumer confidence and weaken labor market condition. Thai tourism also dropped amid tourism campaign.
- Private investment marginally declined in machinery and equipment together with worsen business. While, c onstruction sector improved, real estate sector showed better signal.
- Public investment were greater than last year.
Inflation jumped from low base effect and increase in energy prices

TTBA sees both Thai and US policy rate to hold at least through Q3/2022. Fed tapering is likely to start from Q1/2022. Though, surprisingly high US Inflation (4.2% on April) which followed by 5% on May has slowed down the flattening path of UST curve and put the pressure on DXY index to drop to 5 months lowest level at 89.34 as US markets expects 80% chance of a rate increase from Fed by December 2022. However, we still believe that higher than Fed’s target inflation is one time and will gradually decrease through this year.
USDTHB is likely to continue weakening through 2021 as weaker economic recovery than global peers, negative current account, and covid 19 situation.
Short term TGB will stick to policy rate at 0.50% at least through Q3/2022. Long term TGB will continue to up, though the process has been slowed down by covid situation.