BSP: Consumer confidence down

MANILA, Philippines - Filipino consumers were more pessimistic in the first quarter of the year because of rising oil and food prices, and natural disasters that occurred overseas, according to the 1st Quarter 2011 Consumer Expectation Survey (CES) conducted by the Bangko Sentral ng Pilipinas (BSP).

The consumer confidence index for the first quarter of the year dropped to –23.1 percent from –8.5 percent in the fourth quarter of 2010.

The survey conducted from March 14 to 21 covered 5,920 respondents in the

National Capital Region and nearby areas.

BSP Deputy Governor Diwa Guinigundo said the sharp decline in the level of consumer confidence in the first quarter in relation to the preceding quarter is an “abberation” because it was caused by external factors.

The country’s gross domestic product (GDP) expanded 7.3 percent last year, its strongest growth in 34 years. The Philippines barely escaped recession in 2009 after growth slackened to 1.1 percent from 3.8 percent in 2008 because of the impact of the global financial crisis.

The central bank expected the consumer confidence index to become positive in the first quarter after steady improvements from –28.7 percent in the second quarter of last year, to -14 percent in the third quarter, and finally to -8.5 percent in the fourth quarter.

World events that dampened consumer confidence in the country include the political tension in the Middle East and North African states, the magnitude 6.3 earthquake in New Zealand, the magnitude 9.0 tremor in Japan that spawned a deadly tsunami, and the nuclear fallout from the quake-damaged Fukushima power plant.

Other factors include rising costs of fuel and basic commodities, and expectation of high unemployment rate because of the large number of displaced workers in troubled countries.

BSP Department of Economic Statistics (DES) director Rosabel Guerrero said the dimmer consumer outlook in the Philippines mirrored the weaker consumer sentiment in the US, United Kingdom, Thailand, and disaster-hit countries Japan, New Zealand, and Australia.

“Households that responded to the survey cited the continued increase in the prices of petroleum products, the high cost of goods and services, and the rise in household expenses as the reasons behind their weaker outlook,” Guerrero said.

She said Filipino consumers expect their financial condition to worsen because of the rising cost of basic commodities, higher unemployment rate, and lower income. 

In the following months, it can be expected that expenditures on big ticket items such as houses, consumer durables, and motor vehicles will be lessened.

“Consistent with the decline in the buying conditions outlook for the current quarter, the number of respondents who intended to purchase big-ticket items in the next 12 months dropped,” Guerrero said.

More Filipino consumers also expect interest and inflation rates to go up in the months ahead.

To control inflation, the Monetary Board raised interest rates by 25 basis points last March 24, bringing the overnight borrowing rate to 4.25 percent from 4.0 percent and the overnight lending rate to 6.25 percent from 6.0 percent.

The BSP was also forced to raise its inflation forecast to a range of 4.4 percent to 5.0 percent this year but lowered next year’s forecast to 3.4 percent from 3.5 percent. It has set an inflation target of 3.0 percent to 5.0 percent between 2011 and 2014.

The respondents also expect the peso to depreciate against the US dollar because of lower remittances from overseas Filipino workers.

Guinigundo said the improvement in the confidence level of Filipino consumers in the next quarter would depend on the resolution of tensions in Middle East and North African states and the progress of reconstruction efforts in Japan.