The Thailand Industry Sentiment Index (TISI) dropped to 92.3 points in July from 94.1 points in June, reaching the lowest level in 10 months, as businesses struggled to deal with the impact of high household debt, higher interest rates and political uncertainty.
The political factor was an issue of concern this month, especially after Move Forward Party leader Pita Limjaroenrat failed to secure sufficient support in the parliament on July 13 to become the country's prime minister even though his party gained the most votes in the May 14 general election.
The uncertainty over the formation of a new government dented business people's confidence amid worries over potentially unpleasant consequences for the business sector.
"Purchase orders, production volume and costs as well as business turnover have not been good," said Kriengkrai Thiennukul, chairman of the FTI.
The high cost of living weakened people's purchasing power, which led to less demand for goods and services, eventually affecting the manufacturing sector.
From a global perspective, Thailand's exports have continued to be sluggish due to economic slowdowns among its trading partners.
"One factor that caused a negative impact on Thai exports was that China's economic growth was lower than estimated earlier," said Mr Kriengkrai.
According to the latest Commerce Ministry data, the customs-cleared value of exports dipped for a ninth consecutive month in June, falling by 6.4% to US$24.8 billion.
Exports of agricultural and agro-industrial products contracted by 8.6% year-on-year in June to $4.53 billion, while industrial product exports dropped 4.6% to $19.3 billion.
During the first six months of this year, exports of computers, rubber, jewellery, plastic beads, chemical products and machinery dropped, said the FTI.
The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) announced last month it had revised down its export growth forecast to -2% this year from -1% earlier.
The committee's best-case scenario for exports is zero growth.
The FTI remains positive about the establishment of the new government within this month.
"Payong Srivanich, president of Krungthai Bank, is reportedly tipped to be a candidate for finance minister. If he can take this job, the FTI will be happy because he has worked closely with the FTI and JSCCIB," said Mr Kriengkrai.