The recent Delta outbreak in the Philippines and its ensuing lockdowns only slightly dampened consumption yet slashed household savings, UK-based think tank Pantheon Macroeconomics said Monday.
Citing the government’s latest volume of net sales index report for August released last week, Pantheon Macroeconomics senior Asia economist Miguel Chanco said in a report that “the direct blow of the Delta outbreak to private consumption in the Philippines was trivial.”
Chanco said the 8.4-percent year-on-year growth in the August sales index reflected low-base effects from last year even as this “bump was real, as sales rebounded by 1.4 percent month-on-month, recouping over two-thirds of the decline in July.”
“This result indicates that household spending was affected more immediately by the initial rise in Delta cases in the second half of July, rather than by the brief reimposition of the strictest anti-COVID-19 restrictions in Manila and in other hotspots in the following month,” Chanco said, referring to the revert to enhanced community quarantine (ECQ) in Metro Manila and other areas in August.
Chanco said it helped that more consumers were buying goods online amid movement restrictions, pointing to “substantial—and potentially permanent—increase in the adoption of e-commerce over the past 18 months, by both buyers and sellers.”
“Timely data are hard to come by, but NielsenIQ, which tracks the global consumer space, found a 325-percent increase in online shopping last year, and that close to 70 percent of web-based shoppers intend to continue doing so once curbs are abolished,” he noted.
But Chanco said private consumption, as a whole, remained “bleak” as he pointed to the Bangko Sentral ng Pilipinas’ (BSP) latest consumer expectations survey, which showed a reduction in households’ savings.
“Rainy day funds played a huge part in keeping consumption steady … The rebuilding of the huge savings lost since the pandemic started—a process which has been set back by the Delta squeeze—will weigh heavily on the post-COVID-19 recovery in private consumption over the next 12 months, at the very least,” he said.
Chanco said it did not help that price hikes in the Philippines were the fastest in the region as shown by the above-target year-to-date headline inflation, while cash remittances sent back home by Filipinos working and living abroad “still aren’t rising fast enough to provide any meaningful support.”
Chanco nonetheless sees green shoots of consumption recovery as jobs return while quarantine measures eased.
“At the very least, the labor market is turning ‘less bad,’ which should alleviate some of the drag on confidence… It appears that the underemployment rate has quickly settled back down to its long-run downtrend, falling to 14.7 percent in August, after spiking to 20.9 percent in July,” Chanco said.
“The economy is nearing the point where companies will need to start hiring more workers, as the pool of people who are willing and able to work longer stabilizes at its pre-pandemic size. For now, upward wage pressures will stay non-existent, with the rise in applicants still outstripping stagnant openings,” according to Chanco.