Thailand’s Industrial Output Falls as Floods Threaten Slump in Production

Thailand’s industrial output fell unexpectedly in September as the global recovery faltered, with the worst floods in almost 70 years threatening to exacerbate the slowdown.

The industrial production index declined 0.5 percent from a year earlier, after a revised 6.8 percent gain in August, the Office of Industrial Economics said in a statement today. The median of nine estimates in a Bloomberg News survey was for a 3.2 percent increase.

The Bank of Thailand lowered its economic growth forecasts for 2011 last week after floods swamped about 10,000 factories and stopped production at companies including Honda Motor Co. Thailand makes about a quarter of the world’s hard-disk drives and serves as a production hub for Japanese carmakers and electronics firms.

“Output will fall sharply in the fourth quarter as many companies are forced to suspend operations after the floods,” Thanomsri Fongarunrung, an economist at Phatra Securities Pcl in Bangkok, said before the report. “It will take at least two to three months for them to resume operations after the water recedes. The electronics and auto sectors are the hardest hit.”

Thailand’s SET Index of stocks declined 1.2 percent as of 11:32 a.m. local time, while the baht weakened 0.2 percent to 30.84 per dollar, according to data compiled by Bloomberg.

Japanese carmakers led by Toyota Motor Corp., Honda and Nissan Motor Co. may lose more than $500 million because of the floods, Kohei Takahashi, an analyst at JPMorgan Chase & Co. in Tokyo, said last month.

October Risk

Computer disk-drive maker Western Digital Corp., which counts Hewlett-Packard Co. and Dell Inc. as customers, may see exports from Thailand slide as much as 40 percent this year, Industry Minister Wannarat Charnnukul said Oct. 18.

“The flood crisis will start to affect the manufacturing index from October because many big factories in the auto, hard- disk drive, electrical appliances and electronics sectors are damaged,” the industrial economics office said in the statement.

Thai export growth slowed in September. Overseas shipments climbed 19.1 percent from a year earlier, after surging 31.1 percent in August.

The Thai economy may expand 2.6 percent this year from a previous prediction of 4.1 percent, the Bank of Thailand said Oct. 28, adding that forecasts may be lowered further in November.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Tony Jordan at tjordan3@bloomberg.net