Thai factory output rises in April, but 2025 forecast cut

Thailand's manufacturing production index unexpectedly increased 2.17% year-over-year in April, driven by gains in manufacturing, industrial exports, and tourism, exceeding Reuters' polled forecast of a 2.95% decline. Despite this positive surprise, the industry ministry lowered its 2025 growth forecast to 0%-1% from 1.5%-2.5% due to a 0.75% output decrease over the first four months and challenging export conditions, including potential U.S. tariffs, while car production continued its decline, falling 0.4% in April for the 21st consecutive month.

Analysis

Thailand’s manufacturing production index (MPI) unexpectedly rose 2.17% in April from a year earlier, significantly outperforming the Reuters poll forecast of a 2.95% annual fall, buoyed by gains in general manufacturing, exports of industrial goods, and tourism. Despite this positive monthly figure and an upward revision of March's MPI to a 0.05% increase (from an initial 0.66% fall), output over the first four months of 2025 contracted by 0.75% year-over-year. Reflecting these underlying challenges and external pressures, the industry ministry has substantially lowered its 2025 MPI growth forecast to a range of 0% to 1%, down from the previous 1.5% to 2.5%. Specific sectoral weaknesses persist, notably in the automotive industry, a regional hub, where car production fell 0.4% year-on-year in April, marking its 21st consecutive monthly decline. Furthermore, the export outlook, while showing a 10.2% annual increase in April, is clouded by potential U.S. tariffs, with a 36% tariff looming if a reduction isn't negotiated before a moratorium ends in July, posing a significant risk to Thailand's export-oriented economy.

Key Decisions for Investors

• Investors should interpret the unexpected April MPI surge with caution, weighing it against the 0.75% decline in output over the first four months of 2025 and the significantly reduced full-year growth forecast of 0%-1% for the manufacturing sector.
• The looming threat of U.S. tariffs, potentially 36% if unresolved by the July deadline, warrants close monitoring as it could severely impact Thailand's export-dependent manufacturing sector and overall economic performance, despite the strong April export figures.
• Persistent weakness in key industries, such as the automotive sector's 21st consecutive monthly production fall, suggests underlying structural challenges that may not be offset by a single month's positive overall manufacturing data, meriting a careful assessment of investments exposed to Thai industrial production.