Thai factory output rises in February, halting 22-month decline

BANGKOK (Reuters) - Thai factory output unexpectedly rose in February from a year earlier, ending a 22-month streak of falls and giving some hope of improvement in the beleaguered economy.

The Industry Ministry said output in Southeast Asia's second-largest economy in February rose 3.55 per cent from a year earlier, the first increase since March 2013.

"The output rise was driven by car production," ministry official Somsak Jantararoungtong said, adding that while February output normally isn't high "this time it bucked the trend, making us confident that there will be a clear recovery."

The ministry forecast that output, down 4.6 per cent last year, could increase 3-4 per cent this year.

February output easily beat the most optimistic forecast in a Reuters poll for a 0.59 per cent increase. The poll median was for an 0.25 per cent drop.

This is the second piece of February data indicating some improvement in an economy that came close to recession in 2014 as political protests damaged consumer sentiment and discouraged investments.

Imports last month increased 1.5 per cent from a year earlier, compared to January's 13.3 per cent fall. Some of Thailand's imports go into products later exported, so the incoming shipments could auger well for exports.

Exports in February were down 6.14 per cent from a year earlier, showing that this pivotal growth engine of the economy - weak since 2013 - was still not firing well.

Ten months after the army seized power to end the political turmoil, the military government has struggled to turn around an economy struggling with both weak internal and external demand.

Thailand is a regional production and export hub for global automakers. In February, car production rose a second straight month, by 2.79 per cent from a year earlier. January's 2.3 per cent increase ended a 19-month decline.

But the gains are from a low base, and domestic car sales in February slipped 10.8 per cent on-year.

Electronics production slipped 0.04 per cent from a year earlier while electrical appliances slid 5.06 per cent. In that sector, Thailand has been losing competitiveness to neighbours.

February's factory capacity utilisation was 61.40 per cent, from January's revised higher 61.48 per cent.

Exports contracted in 2013 and 2014, and the central bank sees only 0.8 per cent growth in shipments this year.

With commodity prices low and global demand soft, the government is under increasing pressure to ramp up infrastructure spending to rev up growth.

The central bank recently lowered its 2015 growth estimate 3.8 per cent from 4.0 per cent. Growth last year was just 0.7 per cent.