Exports also fell last month mainly due to weak global demand. Investment in July contracted 5.4% year-on-year and 0.2% month-on-month, said Methee Supapong, senior director of the Monetary Policy Division at the Bank of Thailand.
However, the tourism sector continued expanding thanks to the higher number of arrivals from China, Malaysia and Russia, he added.
"The economic slowdown was not severe because there were factors that helped support the economy, such as rising incomes, a lower unemployment rate and growing loans," Mr Methee said.
Thailand posted the weakest gross domestic product growth among five Asean economies in the second quarter of the year, at just 2.8%. In the same period the Philippines grew 7.5%, Indonesia 5.8%, Vietnam 5% and Malaysia 4.3%.
The Bank of Thailand said private consumption in July was down 0.7% from the same period in 2012 and 0.5% from June this year.
Fewer purchases and orders were recorded, especially for cars and other durable goods. Households were spending less because of higher debt, he said.
As well, lower car purchases reflected the high base of a year ago when the government was offering tax incentives for first-car buyers.
Consumption of non-durable goods, however, rose as reflected by higher imports of food and beverages. Fuel and electricity consumption also increased.
Prices remained stable, with headline inflation in July easing to 2.0% from 2.25% in June. Core inflation was down to 0.85% from 0.88%, he said.
Meanwhile, the central bank reported that its foreign reserves as of Aug 23, totalled US$170.5 billion, down from $172 billion a week earlier, with a net forward position of $23.1 billion.
In the currency market, the baht posted its fifth monthly decline, the longest losing streak in five years, reflecting heavy outflows of foreign capital from stock and bond markets.
The baht touched a three-year low this week as data showed hat exports fell for a third month in July and manufacturing dropped.
Global funds have pulled $2.7 billion from Thai bonds and stocks in August, official data show.
Exports fell 1.5% last month and manufacturing contracted 4.5%, according to data released this week.The current-account deficit rose to $709 million in July from $664 million in June, the Bank of Thailand said.
The baht rose slightly on Friday as the prospect of an imminent strike against Syria diminished, reducing the chance that oil supplies will be disrupted, said analysts.
"Export numbers are still disappointing for Thailand, keeping underlying sentiment for the currency weak for a while," said Nalin Chutchotitham, an analyst at Kasikornbank.
The baht was trading late Friday in Bangkok at around 32.12 to the dollar, compared with 32.16/21 on Thursday, and 31.90/95 a week earlier. It has lost 2.7% so far this month, according to data compiled by Bloomberg.
The currency has lost 8.8% since the end of March and touched 32.31 on Aug 28, the weakest since Aug 2, 2010.
The yield on the 3.625% sovereign bonds due in June 2023 has climbed 34 basis points in August to 4.32%. It reached 4.39% on Wednesday, the highest for a benchmark 10-year bond since November 2009.