Credit card spending & consumer confidence still low testing..

26 มิถุนายน 2560

Credit card spending & consumer confidence still low

Card spending growth last month was slowest for cardholders with income of below 20,000 baht a month. KOSOL NAKACHOL

THE ECONOMY

Credit card spending loses steam

Sector's slowest growth rate in five years in May does not bode well for economic recovery.
26/06/2017
Pawee Sirimai, Oranan Paweewun & Chatrudee Theparat

Credit card spending growth slowed to its lowest annual pace in five years in May.

Credit card spending is losing steam as middle-income households become more cautious. Household consumption is one of the main economic engines countributing to GDP and economic growth. Household consumption accounts for 55% of the country's economic value.

Informal analysis shows spending growth of below 4% during May 2017, one of the lowest in five years, against a 7% growth seen during the same period of last year.

Credit cards account for around 0.4% of Thailand's total payment value, according to the central bank's data.

Card spending growth last month was slowest for cardholders with income of below 20,000 baht a month, the source said. Spending at supermarkets and fashion saw declines, while healthcare, insurance and oil did well.

The amount of credit card cash advances dropped by 4-5% year-on-year, said the source. But the fall did not mean cardholders' purchasing power had deteriorated, just that they were more cautious.

According to the central bank data, credit card spending in the domestic market for the January to April period expanded by a mere 4.3% to 403 billion baht even though the period included the Songkran festival in April, one of Thai consumers' largest spending periods.

At end-April, 19.6 million cards were circulating in the market.

CONSUMERS WARY OF SPENDING

Low growth in credit cards spending in May could stem from cardholders, a proxy of the middle-income earner group, becoming warier of spending amid the uneven economic rebound and rather than diminished purchasing power.

Even though improving farm income since the first quarter has been a boost for those who are at the bottom rung of economic ladder, most of the windfall has been used to repay debt, limiting the spillover effect to middle-income earners.

The first drop in consumer confidence in six months -- to 76 points last month from 77 in April -- underscored weak consumption.

Improving private investment in the second half and export growth should accelerate the economic growth and help full-year GDP reach around a 3.2% level as forecast.

Improving private consumption should be driven by recovering farm prices, growing exports and tourism.

FIRST RECOVERY IN EXPORTS THIS YEAR, THEN PRIVATE CONSUMPTION NEXT YEAR

Overall spending growth on credit cards has cooled down since last year despite the improvement in economic indicators.

A strong recovery in exports has not translated into other sectors, especially private consumption.

The Bank of Thailand (BOT) expects private consumption to continue to expand in the second quarter of this year.

This is according to Don Nakornthab, senior director at the Bank of Thailand's macroeconomic and monetary policy department.

The anticipated continued recovery in private consumption is attributed to recovery in spending on cars, motorcycles and services such as restaurant and domestic tourism, which are expected to see strong growth this year.

an export-led-recovery in merchandise exports, which have posted better-than-expected results this year, should lead to a revival in domestic demand and growth in private consumption next year.

http://www.bangkokpost.com/business/finance/1275751/credit-card-spending-loses-steam

Pittaya Vorapanyasakul, executive vice-president of Krungthai Card (KTC), said