Business, consumer confidence down

Filipinos are less optimistic about their economic prospects in the third quarter of the year as the rainy season and stiffer competition are expected to disrupt the activities of businesses, while consumers see their spending constrained by rising prices.

These were the findings of the latest quarterly surveys on business and consumer confidence released on Tuesday by the Bangko Sentral ng Pilipinas which also showed that companies expected the peso to weaken against the US dollar in contrast to the regulator’s expectations of a stronger local currency this year.

“For the quarter ahead, business outlook was less positive as the confidence declined to 47.6 percent from 52 percent in the previous quarter,” the central bank said in a statement. “Business optimism was dampened on the back of expectations of interruption of business activities during the rainy season and stiffer competition.”

The survey’s confidence index is computed as the percentage of firms that answered in the affirmative less the percentage of firms that answered in the negative with respect to their views on a given indicator. The survey was conducted between April 1 and May 28, 2019, with 1,501 companies polled nationwide. The survey had an 81.9-percent response rate.

The central bank said that, for the third quarter of 2019, the outlook of firms across trade groups was generally less buoyant due to seasonal slack in demand and production activities during the rainy season.

According to the central bank, the percentage of businesses with expansion plans in the industry sector for the third quarter of 2019 was slightly higher at 33.5 percent compared to 33.2 in the previous quarter. However, the average capacity utilization in the industry and construction sectors for the second quarter of 2019 was lower at 75.5 percent from 76.5 percent in the first quarter.

“Respondents expected the peso to depreciate and inflation and interest rates to go up for the third quarter of 2019,” the BSP said.

Meanwhile, consumer confidence was less optimistic for the third quarter as the confidence indices 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.

“Respondents’ less upbeat sentiment for the next quarter and the year ahead stemmed from households’ concerns about higher prices of goods, as well as expectations on the increase in household and educational expenses with the start of school opening for the school year 2019-2020,” the central bank said.

The consumer expectations survey was conducted in the first two weeks of April among 5,583 respondents nationwide, across all income groups.

The BSP also said that the spending outlook index of households on basic goods and services declined to 32.7 percent for the third quarter of 2019 (from 39.6 percent in the previous quarter’s survey results).

The survey showed that fewer respondents expected higher spending on electricity, food, non-alcoholic and alcoholic beverages and tobacco, water, fuel, transportation, personal care and effects, medical care, communication, clothing and footwear, restaurants and cafes, and house rent and furnishing. Meanwhile, the spending outlook remained steady for education, recreation and culture.

The survey results showed that consumers anticipated inflation, interest and unemployment rates to increase and the peso to depreciate for the next 12 months.