Business confidence down, survey shows

BUSINESS confidence—an indication of companies’ willingness to expand operations and increase hiring, among others—dipped in the third quarter as the rainy season dampened sales, a government survey this week showed.

Results of the latest Business Expectations Survey (BES) by the central bank showed local businesses of all sizes were less upbeat over prospects in the current quarter. Confidence was dragged down by the expected effects of the rainy season, higher school expenses eating into consumers’ budgets and prospects of lower crop production.

Despite the decline, officials said the economy was still seen performing well, given the higher level of confidence compared to the same period last year.

“The business confidence index mirrors economic activity,” said Francis Dakila, managing director and head of the Bangko Sentral ng Pilipinas (BSP) economic research department.

For July to September, the business sector’s confidence index declined to 41.4 percent from 49.2 percent in the previous quarter. Dakila said this was widely anticipated, noting that third quarter confidence declined 10 times in the last 15 years.

Despite the decline, Dakila said signs still pointed to the steady improvement in economic performance in the coming months. The third quarter confidence index, which is the difference between optimists and pessimists, was higher than last year’s 34.4 percent.

Dakila said the confidence index’s predictive nature was evident in the second quarter, adding that it was “safe to assume” that third quarter economic numbers would reflect the same behavior.

Business confidence improved in April to June from 45.2 percent in the previous three-month period. Economic growth moved in sync, rising to 5.6 percent in the second quarter from 5 percent in the first.

Even rosier conditions were expected in October to December, survey results showed. When asked about prospects in the fourth quarter, survey respondents were more confident, with the index rising to 53.1 percent from 47.3 percent.

Confidence in the coming fourth quarter was fueled by expectations of higher consumer demand during the holiday season, higher crop production, and election spending.