Consumer spending in PH not yet healed from pandemic

Consumer spending in the Philippines has yet to return to prepandemic normal, Moody’s Analytics said in a new report that highlighted how sticky inflation is derailing the recovery of consumption in Asia-Pacific from the pandemic onslaught.

In a commentary, the unit of the Moody’s Group said the Philippines has yet to fully reverse the “big shift” in consumption pattern that was created during the pandemic—when lockdowns and strict social distancing protocols crushed demand for travel and other services, but boosted sales of goods, especially online.

Moody’s Analytics said services spending in the Philippines and Thailand remains far below the prepandemic trend, reflecting “a high degree of pandemic scarring on both economies.”

Meanwhile, goods consumption in the Philippines and Thailand also fell post-lockdown amid “smaller policy support for households and worse economic damage from the pandemic.”

To make things worse, Moody’s Analytics said stubbornly high inflation is crimping the recovery of consumer spending in the Philippines, where consumption historically accounts for over 70 percent of the nation’s gross domestic product.

“Goods typically make up a smaller share of private consumption than services, so weaker goods consumption won’t completely derail these economies as long as services consumption stays on course,” Moody’s Analytics said.

“But weaker goods spending is a headwind at a time when growth is already hard to come by,” it added.

Data from the Bangko Sentral ng Pilipinas (BSP) showed consumers’ overall confidence index (CI) declined to 2.7 percent for the second quarter of 2024, from 5.6 percent previously.

That the CI stayed positive means the optimists outnumbered the pessimists, although the weaker reading indicated a less upbeat sentiment among consumers. Findings showed the pessimists mostly came from low-income households.

And the weaker optimism would likely persist for much longer after the consumer CI for the next 12 months sagged to 13.4 percent, from 15 percent in the previous survey. INQ