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Business outlook improves – BSP surveys

Consumer confidence slightly weakens

Published

By Lee C. Chipongian

The central bank’s quarterly surveys on business and consumer confidence yielded different results, but generally described as an improvement and stable, and in the months ahead, sentiments are expected to remain the same.

MB file photo.

MB file photo.

Based on the latest Bangko Sentral ng Pilipinas (BSP) Business Expectations Survey (BES) for the second quarter, the business outlook improved with an overall confidence index (Cl) of 40.5 percent from the previous quarter’s 35.2 percent since it is expected that business operations will get better with “favorable macroeconomic conditions” and a decelerating inflation.

The BSP said businessmen expect the following to happen, thus improving their outlook: usual uptick in demand during summer (in view of the foreseen increase in the number of local and foreign tourists), enrollment, and harvest periods; election-related spending in the run-up to the elections in May 2019; sustained increase in orders and projects leading to higher volume of production; expansion of businesses and new product lines; and continued roll-out of government infrastructure and development projects with the approval of the 2019 national budget.

The overall CI for consumer confidence, in the meantime, was “broadly steady” during the same period, which meant the CI was still in the negative at -1.3 percent from -0.5 percent in the first quarter. The CI measured consumers’ overall take on the condition of the economy, household finances, and household income.

According to the BSP, consumers’ “slightly weakened outlook” was because they expect prices of goods and household expenses to remain on the high side, while other concerns cited were about poor health and worries about the high medical costs. The country’s water crisis since April this year was also mentioned by consumers and “may have also contributed to their pessimistic sentiment,” said the BSP.

“Their negative sentiments were, however, counterbalanced by their expectations of the following — improvement in peace and order, additional income, availability of more jobs, good governance, and additional working family members,” said the BSP.

The central bank said business sentiments for next quarter was also less positive, the CI was down to 47.6 percent from 52 percent in the last survey. “Business optimism was dampened on the back of expectations of interruption of business activities during the rainy season and stiffer competition,” said the BSP.

Businessmen also expects the peso to sustain some strength versus the US dollar but they also see higher interest rates.

“The survey results showed that businesses anticipated the peso to appreciate, inflation to decrease, but interest rates to increase for the current quarter (second quarter),” said the BSP.

For the next quarter, they however see a depreciated peso while inflation and interest rates will continue to rise. Inflation, while expected to keep within the two-four percent government target, is projected to be on the high side of the target.

In terms of consumer outlook, the BSP said for the next quarter and the year ahead, consumer confidence was less optimistic as the CIs declined but remained positive at 9.7 percent (from 10.7 percent a quarter ago) and 25.2 percent (from 28.4 percent in the previous quarter’s survey results), respectively.

The “less upbeat sentiment” for the third quarter and in the next months was due to concerns on rising prices and increase in household expenses with school re-starting in June.

As far as economic condition and family financial situation, consumers have a generally syeady sentiment on these, said the BSP.

For the second quarter, consumer sentiment was steady for the country’s economic condition and family financial situation but was less upbeat on family income, reported the BSP. “For the near term and the year ahead, consumer confidence on all three indicators was less favorable compared to the previous quarter’s survey results, except for economic condition which was more buoyant for the third quarter.”

The BSP added: “For the current quarter, consumer confidence was steady for low- and middle-income groups while the high-income group was less optimistic as they anticipated increase in the prices of commodities and household expenses. For the next quarter and the year ahead, the consumer sentiment was generally less optimistic across income groups compared to a quarter ago.”

Consumers’ spending outlook index for households on basic goods and services declined to 32.7 percent for the third quarter, from 39.6 percent previously. The spending outlook remained steady for education, recreation and culture.

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