MANILA, Philippines — Filipino consumers are now spending less on essential goods and services, and consuming more of nonessential items—a shift that’s not surprising at all as the Philippines moves closer to “upper-middle income” economy status, HSBC Global Research said.
In a May 30 report, HSBC noted a “substantial deceleration” in the average growth of food, clothing, and household furnishing expenditure in 2023.
While the decline in household furnishing was expected amid a high-interest rate environment that ruined Filipinos’ renovation plans, which are typically funded by credit, HSBC said the weaker demand for food and clothing was “surprising.”
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This was in stark contrast to more than 10 percent growth in consumer spending on restaurants, hotels, and recreational goods as well as toys, instruments, books, and services like gyms. Transport, which can be a mix of both essential and nonessential expenses, is also growing by “double-digits,” HSBC said.
Aris Dacanay, economist at HSBC, said the shift in consumer preferences was expected as the Philippines was working on its goal to become an upper-middle income economy.
Convenience and fun
”Even in challenging times, the Filipino consumer has gone beyond covering the bare essentials and is now spending on goods and services that make daily living more convenient and, perhaps, more fun,” Dacanay said.
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“This suggests that, when inflation does decline, overall household consumption will likely pick up, but, perhaps, more on goods and services that are beyond just subsistence—the nicer things, so to speak,” he added.
Such an outlook is seen to bode well for a country where consumer spending accounts for over 70 percent of gross domestic product.
Growth of household spending had eased to 4.6 percent in the first quarter, the weakest reading since the 4.8 percent contraction at the height of COVID-19 pandemic in the first quarter of 2021. —Ian Nicolas P. Cigaral