Consumers, businesses upbeat on prospects as economy fully reopens

MANILA, Philippines — Consumers and businesses in the country took on a more bullish outlook for the months ahead as the economy reopened, the Bangko Sentral ng Pilipinas reported Friday.

Results of a nationwide BSP survey of 5,437 families showed the overall consumer confidence index (CI) stayed in the negative zone at -5.2% in the second quarter, a stark improvement compared to the -15.1% reading in the preceding quarter. Sentiment showed signs of improvement as the consumer CI in the third quarter rose to 11.2% from 6.4% previously, while confidence for the next 12 months inched up 32.4%.

A separate central bank poll of 1,509 companies showed the business CI grew to 35.4% for the second quarter from 32.9% in the preceding three months. However, for the third quarter and the next 12 months, business sentiment dimmed to 46.4% and 59.9%, respectively.

The consumer CI remaining in the negative territory means pessimists continued to outnumber optimists. The BSP clarified that "the number of households with optimistic views increased, but was still fewer than those with pessimistic views." Meanwhile, mixed sentiment in the business sector means more enterprises were excited about the prospects of renewed activity while keeping caution. 

The latest survey results were not surprising at all, considering that most of the economy has reopened itself to near pre-pandemic levels of activity while heavy election-related spending took place. Amid that, consumers and firms were coming to bear with expensive oil prices and rising inflation, which could inevitably cloud sentiment in the coming months.

For Nicholas Antonio Mapa, senior economist at ING Bank in Manila, inflation will play a larger role in determining consumer spending in the months ahead.

"Consumer Expectations Survey coverage ended in early May and households already expressed concerns about accelerating inflation. Since the survey completion, inflation has skyrocketed past the target and will likely head higher in the coming months," he said in a Viber message.

Mapa likewise pointed out that "it was interesting the Business Expectations Survey coverage was until June."

Breaking down the BSP’s report, both consumers and businesses attributed their rosy outlook on lax pandemic restrictions, which facilitated the economy's reopening. Consumers were more than keen to take on loans, as businesses took to hiring more to boost their workforce.

"With prices and interest rates on the uptrend, it will be interesting to see whether households can sustain the recent optimism that drove purchases of durable goods and the capability to take out loans," he added.