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(Updates with auto production drop in seventh paragraph.)
Nov. 28 (Bloomberg) -- Thailand’s industrial output slumped by the most in more than a decade in October as the nation’s worst flooding in almost 70 years shut thousands of factories and halted manufacturing.
The industrial production index fell 35.8 percent from a year earlier, after a revised 0.3 percent contraction in September, the Office of Industrial Economics said in a statement today. The drop was the biggest since at least January 2000, the earliest data available on Bloomberg. The median of 11 estimates in a Bloomberg News survey was for a 15 percent decline.
The Bank of Thailand signaled it has room to cut interest rates to buttress the economy against faltering global growth and floods that swamped seven industrial estates north of Bangkok, closing factories operated by Western Digital Corp. and Honda Motor Co. The National Economic and Social Development Board said last week flood damage may reach 300 billion baht ($9.6 billion) as it slashed its forecasts for growth this year.
“Industrial production collapsed in October, offering the first indication of the flooding’s impact on the real economy,” said Rahul Bajoria, a Singapore-based regional economist at Barclays Plc. “We think the central bank is likely to provide monetary stimulus in its meeting” on Nov. 30, he said.
Thailand’s finance ministry cut its 2011 economic growth forecast to 1.7 percent to 2 percent from 2.6 percent earlier, Somchai Sujjapongse, head of the fiscal policy office, told reporters in Bangkok today. The ministry expects gross domestic product to expand 5 percent next year as the government spends to rebuild damaged areas, he said.
Thailand makes about a quarter of the world’s hard-disk drives and serves as a production hub for Japanese carmakers and electronics firms.
Auto production fell 61.3 percent in October from a year earlier, the Office of Industrial Economics said today. Toyota Motor Corp. suspended its local production from Oct. 10 to Nov. 21, while Honda, which halted manufacturing since Oct. 9 hasn’t set the date when it will resume output, it said.
Hard disk drive production fell 52.4 percent last month from a year ago, while manufacturing of electronics parts slumped 45.5 percent, the Office of Industrial Economics said, adding it may take one to two months before plants can resume operations after waters recede.
The “manufacturing sector was among the hardest hit in last month’s floods,” Radhika Rao, an economist at Forecast Pte in Singapore, said before the report. The odds for the central bank to cut its key rate by 0.5 percentage point at its meeting this week is “on the rise,” she said.
Southeast Asia’s second-largest economy may contract 3.7 percent in the fourth quarter, the National Economic and Social Development Board said Nov. 21. It cut its forecast for growth this year to 1.5 percent from as much as 4 percent earlier.
Exports grew 0.3 percent in October, the slowest pace in two years, as weakening global demand and the floods curbed overseas sales. Shipments may contract 15 percent in the fourth quarter as many factories will take time to resume operations, the Commerce Ministry said Nov. 22.
Prime Minister Yingluck Shinawatra has proposed spending 130 billion baht on rehabilitation and measures to prevent future floods. The damage from the disaster, which has claimed more than 600 lives since July, may reach 400 billion baht, Barclays estimates.
Thailand’s unemployment rate may climb to 1.8 percent to 2.3 percent in the fourth quarter because of widespread flooding, the National Economic and Social Development Board said in Bangkok today.
The jobless rate will recover in the first quarter and return to a normal state in the second quarter as manufacturing resumes, it said. In the first nine months, the unemployment rate stood at 0.7 percent, the agency said.
--With assistance from Supunnabul Suwannakij in Bangkok, Michael Munoz in Hong Kong, and Stephanie Phang in Singapore. Editors: Shamim Adam, Cherian Thomas
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