Profits slow and Purchasing Index Shrinks
THAILAND 'ECONOMIC CONDITION INDEX' EXPECTED TO DECLINE IN Q3
1. Thailand’s household economic condition index is likely to drop further due to the ongoing global economic slowdown. Another drop would make it the third this year, measured in quarters. The slowdown is impacting the domestic economy and employment, according to the Kasikorn Thai research centre.
2. About 60% of retail business operators (life-style products and consumer products) in Bangkok and surrounding provinces report poor sales this year, compared to last year’s performance, and 65% were not sure if or when their businesses will recover, according to the Kasikorn Thai research centre report.
3. Amidst stagnant consumer purchasing power and continuing pressure on retail businesses, the Kasikorn Thai research centre predicted retail business next year might grow between 2.7%-3%, compared to this year’s 3.1%.
THAILAND MANUFACTURING PRODUCTION INDEX (MPI) IN OCTOBER FELL 8.45%
1. Thailand's manufacturing production index (MPI) in October fell 8.45% from a year earlier, dragged down by lower production of cars, petroleum and steel, the industry ministry said on Wednesday.
2. Capacity utilisation was at 62.83% in October, compared with September's revised 63.80%.
3. The ministry forecast is that the MPI will drop 3.8% this year and increase 2%-3% next year.
THAI OCT MEDIAN FACTORY OUTPUT FALLING 4.95% Y/Y
1. The median forecast from eight economists was for the manufacturing production index to fall 4.95% in October from last year, after September's drop of 4.7%.
2. Industrial goods, which account for about 80% of Thailand's total exports, a key economic driver, declined 4.54% in October from a year earlier.
WEAKER ECONOMIC GROWTH LEADING TO LOST REVENUE, COST CUTS AND ENDANGERED JOBS IN THAILAND
1. Some 70% of Thailand's GDP comes from exports. With shipments reeling from the strengthening baht, the US-China trade dispute and technological disruption, the manufacturing and services sectors have been feeling the pinch of flagging shipments.
2. The unemployment rate and laid-off workers will probably increase next year, as a recovery in the manufacturing and services sectors is still not present.
3. Weaker manufacturing and lower revenue in the services sector mean businesses have had to resort to cost-cutting measures to withstand the negative impact.
4. Automotive industry flashed danger signs with the widespread news on social media in August that General Motors Thailand, the local production unit of the US parent, had cut a further 327 jobs at its Rayong plants.
5. In the same month, another US car maker completed its restructuring plan that aimed to cut 70,000 salaried employees worldwide. Ford Thailand declined to clarify the local labour situation, saying only that two car plants in Rayong still employ 5,000-6,000 workers. The local operation remains a hub for Ford's international markets group.
6. The Federation of Thai Industries (FTI) has revised its outlook for the country's car production in 2019 to 2 million vehicles, down from 2.15 million, blaming bearish sentiment for both local sales and exports.
7. For the local car market, the club said this year's sales projection has been cut from 1.05 million cars to 1 million, as it saw a contraction for five months in a row from June to October.
8. Those who lose their jobs invariably enter the so-called informal sector or seek out a part-time job, and they are counted as employed. The informal sector of the Thai economy, comprising anyone who's not covered by formal work arrangements, accounted for more than 64% of the total workforce in 2013.
9. Despite the closure of nearly 1,400 factories during the first 11 months of 2019, application requests for new factory openings totalled 2,889 as of Nov 12, said Krichanont Iyapunya, a deputy spokesman at the Industry Ministry.
JAPAN'S GROWTH IN DOMESTIC MANUFACTURERS' PROFITS SLOWS DOWN
1. The Japanese government warned on Friday that growth in domestic manufacturers' profits was slowing on the back of sluggish exports caused mainly by a global economic slowdown.
2. For employment, the report lowered the assessment for the first time in five years and said the situation is "improving," instead of "improving steadily" as in the October edition.
3. But a government official said that the number of new job openings has been on the decline particularly in the manufacturing industry.
4. The monthly report maintained its overall assessment of the Japanese economy, saying the world's third-largest economy "is recovering at a moderate pace" with "weakness lasting longer mainly in exports."
JAPAN MANUFACTURING PURCHASING MANAGERS' INDEX (PMI) SHRINKS
1. Japan’s factory activity shrank for a seventh consecutive month in November, as domestic and export demand remained in the doldrums and reinforced the challenge facing policymakers trying to prop up an economy growing at its slowest pace in a year.
2. The Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) edged up to a seasonally adjusted 48.6 from a final 48.4 in the previous month.
3. Slack in export demand, the protracted U.S.-China trade war and limited policy levers stack up against the chances of an improvement in Japan’s economy
4. The index remained below the 50.0 threshold that separates contraction from expansion for a seventh month. If the final reading due early next month confirms the contraction, it will mark the longest such run since a nine-month stretch from June 2012 to February 2013.
5. The PMI follows recent calls by Japan’s ruling coalition lawmakers for an extra budget that would include $92 billion in spending to support slowing growth and ensure a fragile economic recovery remains on track.
6. The Jibun Bank Flash Japan Composite PMI rose to 49.9 from a final 49.1 in the previous month.
JAPAN MANUFACTURING STRATEGY SHIFTS
1. Japanese manufacturing has shifted from making brand-name products to cornering specific segments of the global supply chain.
2. In 1990, Japanese semiconductor companies accounted for six of the top 10 semiconductor companies in the world. However, since the beginning of this century, Japan’s semiconductor industry has declined amid U.S. pressure and international competition.
3. As of 2019, only one Japanese semiconductor company – Toshiba – was ranked among the world’s top 10.
4. According to Yuichi Washida, a scholar at Hitotsubashi University, Japanese manufacturers have suffered “four straight defeats” since the late 1980s in the competition for international standards in software, integrated circuits, internet, and mobile networks.
5. The latest changes in Japanese companies, the key strategy for the Japanese manufacturing industry to remain competitive now is “from integration to zero,” which charts a new path for the Japanese manufacturing industry in the global manufacturing chain.
6. Other manufacturers seeking to expand their businesses try to cover the entire industrial chain, which seems to be an ideal competitive strategy. However, the Japanese manufacturing industry is now taking a different strategy — many Japanese companies have withdrawn from the businesses of taking charge of the whole machine, which includes system, branding, and marketing.
7. For instance, Toshiba and Sanyo have long since withdrawn from the whole machine business, but they have grasped the key components market and thus realized the strategy of getting “from integration to zero.”
8. What is unique about this strategy is that while other people are marketing their brands to the public, Japanese companies only focus on the production of high-quality core components, which are a crucial part of the entire industrial chain.
9. The resulting profit margin may be higher than in a business model that covers the whole industrial chain. As the world gradually shifts to a consumer society, the world has entered an era of fierce market competition. But no matter which company’s brand wins the market, the core components of Japanese manufacturing are indispensable and Japanese companies will thus guarantee their own stable market.
Source:
https://thediplomat.com/2019/11/what-can-we-learn-from-made-in-japan/
https://www.reuters.com/article/us-japan-economy-pmi/japan-november-factory-activity-shrinks-for-seventh-month-increases-economic-strains-flash-pmi-idUSKBN1XW019
https://mainichi.jp/english/articles/20191123/p2g/00m/0bu/006000c
https://www.nasdaq.com/articles/poll-thai-oct-factory-output-seen-falling-4.95-y-y-2019-11-25
https://thethaiger.com/hot-news/economy/thailands-economic-condition-index-expected-to-decline-in-q3
https://www.bangkokpost.com/business/1803279/factory-output-falls-8-45-y-y-worse-than-forecast
https://www.bangkokpost.com/business/1796494/the-slowdown-hits-home
