Businesses turn more optimistic in Q2, but consumers wary of higher prices

MANILA, Philippines — Businesses turned more optimistic for the second straight quarter in the second quarter, but Filipino consumers are wary of higher prices and expenses, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Redentor Paolo Alegre, director of the central bank’s Department of Economic Statistics (DES), said results of the latest Business Expectation Survey (BES) showed business outlook improved for the second straight quarter with the overall confidence index increasing to 40.5 percent in the second quarter from 35.2 percent in the first quarter.

This was the highest in six quarters or since hitting 43.3 percent in the fourth quarter of 2017.

“This means that the number of optimists increased and continued to be greater than the number of pessimists during the quarter,” Alegre said.

Alegre pointed out the respondents of the BES undertaken from April 1 to May 28 attributed their more upbeat outlook to the continued roll-out of government infrastructure and development projects with the approval of the 2019 national budget last April 15 by President Duterte as well as the election-related spending in the run up to the mid-term elections last May.

Alegre said respondents also cited the usual uptick in demand during summer with the expected increase in the number of local and foreign tourists, enrollment, and harvest periods as well as the sustained increase in orders and projects leading to higher volume of production and expansion of businesses and new product lines.

“They were also optimistic that their business operations would benefit from the favorable macroeconomic conditions in the country, particularly the easing of inflation in 2019,” he said.

The country’s gross domestic product (GDP) growth eased to a four-year low of 5.6 percent in the first quarter from 6.3 percent in the fourth quarter due to the budget impasse.

The GDP expansion is seen picking up in the coming quarters as the Duterte administration ramp up infrastructure projects as it plays catch up for public spending.

Alegre, however, said results of the latest Consumer Expectation Survey (CES) undertaken from April 1 to 13 showed that Filipino consumers are less optimistic as the overall confidence index slipped to -1.3 percent in the second quarter from -0.5 percent in the first quarter.

Alegre attributed the slightly weakened outlook in the current quarter to the expectations of higher prices of goods and household expenses.

“Concerns cited by consumers on poor health and high medical expenses as well as water crisis may have also contributed to their pessimistic sentiment,” Alegre said.

According to Alegre, the negative sentiments of Filipino consumers were counterbalanced by the expected improvement in peace and order, additional income, availability of more jobs, good governance, and additional working family members.

BSP Assistant Governor Francisco Dakila said consumers are still feeling the impact of the tightening cycle that saw interest rates rise by 175 basis points due to rising inflation.

For the third quarter, businesses turned less optimistic as the overall confidence index eased to 47.6 percent from 52 percent, while Filipinos also turned less optimistic as the index slipped to 9.7 percent from 10.7 percent.