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Mazda Shifting Assembly of CX-3 Sports Utility from Thailand to Japan

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Japanese Automaker Mazda Motor Corp will shift some production of the CX-3 destined for the Australian market from Thailand to Japan. The Automaker has cited adverse impact from the stronger Thai baht.

Assembly of CX-3 sports utility vehicles will be moved to its Yamaguchi factory in southwest Japan this year, the report said, without citing anyone. Mazda has the capacity to make about 135,000 cars in Thailand annually.

The baht has climbed more than 8% against the dollar over the past year. Consequently hurting Thailand’s export-oriented economy. The kingdom is on track for its slowest economic growth since 2014. Thailand is also facing headwinds including the US-China trade dispute and political uncertainty.

Thailand Experiencing Stagflation

Stagflation depicts an unusual situation whereby an economy experiences both a slowdown and high inflation at the same time. A textbook example is the US economy of the early 1970s. Consequently it suffered 9% unemployment along with 12% inflation. The culprit was a doubling of world oil prices which pushed the US economy into a recession. It was also responsible for raising the cost of goods and services.

Fast forward 50 years and, believe it or not, stagflation is now being experienced in Thailand.

The stagnation needs no explanation, but the inflation sure does. The reason being official inflation figures are in sharp contrast with everyday price pressures. According to Thai government statistics, the consumer price index rose a mere 0.1% in October this year. Food prices increased by an average 2.2% while non-food-product prices fell by 1.1%. If you trust these numbers, Thailand has practically no inflation.

We consumers would wholeheartedly disagree. In a survey conducted by Suan Dusit Rajabhat University (Suan Dusit Poll) in November this year; 65.5% of respondents identified the high cost of living. Identifying it as Thailand’s most troubling economic problem. Surprisingly, only 39.2% chose the sluggish economy as the most serious problem.

The respondents were not wrong. The slowing economy is affecting individual consumers differently. The higher cost of living hits everybody (hard) every time they pull out their wallets.

Another possible explanation is import-driven inflation. But with a strong baht, there is no possibility of higher-priced imports. In fact, the strong baht is helping to lower domestic prices.

Thai consumers, have absorbed higher prices by lowering their consumption in order to keep a fixed budget.

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