Consumers optimistic, but businesses less upbeat in Q3 — BSP

MANILA, Philippines — Filipino consumers turned optimistic as the overall confidence index rebounded to positive territory in the third quarter, but more businesses turned less optimistic due to lower demand and a slowdown in business activities.

Redentor Paolo Alegre, director of the Department of Economic Statistics (DES) at the Bangko Sentral ng Pilipinas (BSP), said the latest Consumer Expectations Survey (CES) showed the overall index improving to 4.6 percent in the third quarter from –1.3 percent in the second quarter.

The upbeat outlook of Filipinos, Alegre said, could be attributed to improved optimism on the country’s economic condition, family financial situation and family income.

“For the third quarter, the confidence index for economic condition reverted to positive territory. Moreover, the confidence indexes for financial situation and family income were less negative and higher, respectively,” Alegre said.

The country’s gross domestic product (GDP) growth eased to a four-year low of 5.5 percent in the second quarter from 5.6 percent in the first quarter due to soft global market arising from the US-China trade war as well as the impact of the delayed implementation of the 2019 national budget.

The economic expansion is expected to pick up in the second half with the government’s catch up plan after averaging 5.5 percent in the first half, lower than the six to seven percent target set by economic targets.

For the fourth quarter, Alegre said consumer confidence was more upbeat as the index rose to 15.8 percent from 9.7 percent in the third quarter.

Likewise, consumer optimism for the next 12 months improved as the confidence index increased to 29.8 percent from the second quarter survey result of 25.2 percent for the next 12 months.

Furthermore, Alegre said consumers expect inflation, interest and employment rates to increase and the peso to depreciate over the next 12 months.

On the other hand, Alegre said the latest Business Economic Outlook (BES) showed the overall confidence index slipped to 37.3 percent in the third quarter from 40.5 percent in the second quarter.

“The lower but positive confidence index means that the number of optimists declined but continued to be greater than the number of pessimists for the third quarter,” Alegre said.

Alegre attributed the weaker sentiment of businesses to seasonal factors such as slack in the demand and slowdown of business activities during the rainy season, deciine in orders leading to lower sales, lack of supply of raw materials, perceived unfavorable effects of various government policies including rice tariffication law and banning of provincial buses on EDSA as well as stiffer competition.

Alegre said exporters, importers dual-activity and domestic oriented businesses were less positive due largely to the seasonal slack in consumer demand in the third quarter.

“For the third quarter, business sentiment was less optimistic across sectors, except for the services sector, which was more upbeat. Aside from the sluggish demand during the rainy season, the foreseen negative effect of rice tarrification law was also part of the reasons cited by the respondents for their less buoyant outlook,” Alegre said.

According to Alegre, the outlook of construction firms was the least buoyant among the three sub-sectors due to the uncertainty caused by the trade war between the US and China as well as the perceived bureaucracy and corruption in the government..

BSP assistant governor Iluminada Sicat told reporters the overall business confidence index is usually down during the third quarter of the year. “This is more of seasonality,” Sicat said.

For the fourth quarter, the survey showed businesses turned more upbeat with the confidence index rising to 56.1 percent from 47.6 percent due to higher consumer demand during the holiday and harvest season, rising orders, more favorable macroeconomic conditions such as easing inflation, stable exchange rate, and lower interest rates as well as higher government spending on infrastructure.