Businesses are less upbeat while Filipino consumers turned pessimistic about the third quarter, with inflation still a common concern for them, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
A quarterly BSP survey of 5,475 households showed the overall confidence index (CI) of Filipino consumers for the next quarter had turned negative at -0.4 percent, from 2.7 percent in the preceding round of the poll.
READ: Consumer confidence weakens while businesses are upbeat — BSP polls
A negative CI means pessimists outnumbered the optimists. Data showed the last time the consumer CI for the upcoming quarter turned negative was back in the first quarter of 2021, when pandemic-induced lockdowns had roiled the labor market.
What fueled such pessimism was respondents’ expectations of a faster increase in prices of goods, the BSP reported. Some consumers also worried about the possibility of having lower income in the next three months amid fewer available jobs.
For that reason, survey results suggested that a “moderation” in consumer spending may be expected in the next three months. At the same time, the percentage of households with savings decreased to 31.4 percent in the second quarter, from 33.5 percent in the first quarter.
Rosy outlook 12 months ahead
Meanwhile, the CI for households in the next 12 months stayed positive at 13.5 percent. But the latest reading was slightly lower than 13.4 percent recorded in the previous poll, indicating that consumers were less upbeat.
Makoto Tsuchiya, economist at Oxford Economics, said that while inflation was expected to ease in the coming months, a recovery in consumer spending might take some time.
READ: Banks kept tight lending standards to businesses in Q1
“All in all, despite our expectation of sustained disinflation, we don’t expect it will result in a quick rebound in consumer spending,” Tsuchiya said in a report.
“Any meaningful recovery is likely to be delayed until next year, and this year’s growth will likely remain soft amid subdued domestic demand and tepid global growth,” he added.
The BSP said inflation in June might have settled from 3.4 to 4.2 percent, meaning there’s still a possibility that price increases would breach the central bank’s 2 to 4 percent target range.
“Increases in the prices of agricultural commodities like rice, vegetables, meat and fish, along with the peso depreciation and higher domestic oil prices, are the primary sources of upward price pressures for the month,” the central bank said.
“Meanwhile, lower electricity rates and fruit prices could contribute to the deceleration in inflation,” it added.
Less optimistic
A separate central bank survey of 1,526 companies showed the CI for businesses for the next quarter declined to 43.7 percent, from 48.1 percent registered in the previous poll.
The BSP said the less optimistic outlook stemmed from their expectations of lower demand, elevated commodity prices and slower economic growth. This, in turn, may result in slower hiring activity of companies in the third quarter.
The weaker optimism of businesses is expected to continue in the next 12 months after the CI for the period decreased to 56.5 percent from 60.8 percent before.
“For third quarter 2024 and the next 12 months, the business sentiment of small-sized and large-sized firms was less upbeat while that of medium-sized firms was little changed,” the BSP said.