Thai manufacturing sees strongest growth since May 2023 on record new orders

Production expanded at its fastest pace in over 2½ years as domestic demand hits decade-high.

Thailand's manufacturing sector ended 2025 with its strongest performance in more than two and a half years, driven by a record surge in new orders that propelled production to levels not seen since May 2023.

The S&P Global Thailand Manufacturing Purchasing Managers' Index (PMI) rose to 57.4 in December, up from 56.8 in November, marking the sharpest improvement in manufacturing conditions since May 2023. The index has now remained above the neutral 50.0 mark for eight consecutive months. A reading above 50 indicates expansion, whilst below signals contraction.

The remarkable performance came despite persistent weakness in export markets, with domestic demand proving robust enough to drive the sector's strongest expansion in over two years.

Central to the latest expansion was an extraordinary surge in demand. Incoming new orders rose at the fastest pace in a decade, driven by marketing promotions and better underlying demand conditions. This contributed to higher production in December, with nearly half of all respondents (48%) indicating growth in output compared with just 11% reporting a decline.

The strength of new business growth was unprecedented in the survey's recent history, suggesting Thai manufacturers successfully captured domestic market opportunities despite challenging global conditions.

Export weakness persists

Foreign demand remained subdued, however, as new export orders fell for the fifth month in a row. The continued decline in overseas sales underscored the sector's heavy reliance on domestic consumption, with international trade conditions offering little support to the expansion.

Production accelerates to 2½-year high

The surge in new orders enabled Thai manufacturers to expand output at the fastest rate since May 2023. In response to higher production requirements and in an attempt to rebuild inventory, manufacturers raised their purchases at a quicker pace in December. However, the substantial rise in production resulted in a further depletion of pre-production inventories during the month.

Meanwhile, goods producers reached into their stocks of finished goods to help fulfil orders, as capacity constraints became increasingly apparent.

Employment declines despite growth

In a surprising development, staffing levels declined across the Thai manufacturing sector for the first time in nine months, albeit only slightly. The reduction in workforce capacity contributed to a further accumulation of backlogged orders, suggesting firms struggled to keep pace with demand despite the strong production performance.

The employment decline raises questions about whether manufacturers are confident the surge in orders will be sustained or are choosing to manage capacity through existing staff.

Margin pressures intensify

On prices, higher costs of raw materials and semi-finished goods led to a second successive monthly increase in average input prices. This came amidst renewed pressure on supply chains as lead times lengthened after stabilising in November.

Despite an intensification of cost pressures, goods producers in Thailand lowered their charges fractionally in December to support sales, squeezing profit margins in pursuit of market share.

Overall sentiment in the Thai manufacturing sector remained positive in the closing month of the year. Although the level of confidence softened from November, it remained well above the series average, signalling strong optimism regarding output growth in the year ahead. Companies cited hopes for business development plans and improvements in economic conditions to drive sales in 2026.

Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, said: "The latest S&P Global PMI data revealed that Thailand's manufacturing sector further improved at the end of the fourth quarter. Demand was robust into the end of the year, which supported another substantial rise in goods production. This was despite persistent weakness in external sales.”

"Forward-looking indicators, including the new orders and future output indices, suggested that output growth may sustain into the opening months of 2026. That said, the falling employment trend will need to be monitored. Additionally, margin pressures intensified for goods producers in Thailand at the end of the year, though the reduction in output charges bodes well for supporting near-term demand growth."

The data suggest Thailand's manufacturing sector enters 2026 from a position of remarkable strength, with the strongest growth momentum in more than two years. However, the sector's reliance on domestic demand, declining employment and compressed margins present potential vulnerabilities if the current surge in new orders proves temporary. The challenge for manufacturers will be sustaining growth whilst managing capacity constraints and cost pressures without the support of export markets.