By Boontiwa Wichakul and Orathai Sriring
BANGKOK, Nov 27 (Reuters) - Thai factory output in October rose for the first time in five months, thanks to comparison with a low, flood-hit base a year earlier, and was robust enough to back expectations that the central bank will keep interest rates unchanged on Wednesday.
Output in October was 36.12 percent higher than a year earlier, the Industry Ministry said on Tuesday. In September, factory output contracted by a revised 15.9 percent.
Economists in a Reuters poll had forecast an October increase of 29.8 percent. A big jump in the number - the first gain in factory output since May - was expected because October 2011 was when devastating floods started battering Thailand's big industrial zones.
October also brought the first month-on-month output rise since May. On an unadjusted basis, it was up 0.28 percent compared with September, when it fell 0.51 percent, the ministry said.
The data came a day before the central bank's policy committee meets. Most economists believe the committee will leave the benchmark interest rate unchanged on Wednesday to see the impact of a surprise 25 basis point cut last month to 2.75 percent.
'We maintain our view that no rate cut is necessary as domestic demand is very strong,' said Kampon Adireksombat, an economist with Tisco Securities.
'The low base will pan out for a few months, but we also see a very strong expansion in vehicle manufacturing as many car buyers are waiting for their cars to be delivered,' he said. 'Car makers should enjoy this extra demand until the first half of next year.'
Car sales are extra-buoyant at present, relative to a year earlier, thanks to the floods and to government tax breaks given after them for first-time buyers. The tax breaks will end on Dec. 31.
Thai car sales in October soared 233 percent from a year before. Auto production is expected to hit a record 2.2 million in 2012, up 51 percent from 2011, according to the Federation of Thai Industries.
In October, annual output gains were led by cars, electronics, electrical appliances, beer and petroleum, the ministry said.
OUTPUT SEEN PICKING UP IN H2
The ministry has said it expects factory output to rise 5-6 percent this year and 3.5-4.5 percent in 2013 but global woes remain the key risk. Output dropped 9.3 percent in 2011 due to the floods.
While the low base from the floods will also lift on-year production numbers for November and December, weak global conditions will continue to be a drag for now.
'We expect production to improve clearly in the second half of next year as the impact of Europe's crisis should ease,' Hathai Uthai, deputy director general of the ministry's Office of Industrial Economics, told a news conference.
'Most flood-hit factories are back to normal but it will take time for some markers of hard disk drives to restart as some have relocated or sold business after the floods,' he said.
Although normal capacity was restored, some firms are still not running at full capacity due to soft demand for exports, much of which are industrial goods.
Output data tracks that of exports, which are equal to more than 60 percent of Thailand's gross domestic product each year.
Customs data showed exports jumped 15.6 percent in October year-on-year, less than expected from the low 2011 base, which indicated the slowing global economy is still hurting overseas demand..
Many of the flood-hit care and electronics firms are exporters. Thailand is a regional hub and export base for top global car makers and producers of hard disk drives.
(Additional reporting by Sinsiri Tiwutanond; Editing by Richard Borsuk) Keywords: THAILAND ECONOMY/OUTPUT
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