BSP finds busi­nesses less bullish, con­sumers more pes­simistic in Q4

Business World - - Front Page - By Melissa Luz T. Lopez Se­nior Reporter

EVEN the sea­sonal hol­i­day cheer failed to lift in­vestor and con­sumer spir­its in this quar­ter, with con­fi­dence plum­met­ing to multi-year lows as in­fla­tion con­tin­ues to bite, ac­cord­ing to find­ings of the cen­tral bank’s lat­est sur­veys.

Busi­ness op­ti­mism eroded in the cur­rent quar­ter to a nine-year low while house­holds were at their most pes­simistic in four years.

“Both (seg­ments) grew more cau­tious due to rel­a­tively higher com­mod­ity prices,” Re­den­tor Paolo M. Ale­gre, Jr., of­fi­cer-in-charge of the Bangko Sen­tral ng Pilip­inas’ (BSP) Mon­e­tary Pol­icy Sub- Sec­tor, said in a press brief­ing at the cen­tral bank head­quar­ters in Manila on Thurs­day.

BUSI­NESS OP­TI­MISM DROPS

Busi­ness con­fi­dence slipped to 27.2% this quar­ter from 30.1% in the pre­ced­ing three months and the 43.3% a year ago, ac­cord­ing to the Busi­ness Ex­pec­ta­tions Sur­vey (BES) pub­lished yes­ter­day.

The fig­ure sus­tains a de­cline that be­gan in the first quar­ter.

The cen­tral bank said firms were less up­beat due to faster in­fla­tion, a weaker peso, higher in­ter­est rates, lower sales vol­ume and or­ders, as well as lim­ited sup­ply of raw ma­te­ri­als.

“Busi­ness sen­ti­ment across sec­tors was gen­er­ally less op­ti­mistic for Q4 2018 and Q1 2019. Across sec­tors, firms’ out­look was ad­versely af­fected by ris­ing com­mod­ity prices,” Mr. Ale­gre said.

Op­ti­mism eased de­spite the ex­pected sea­sonal uptick in con­sumer de­mand in the weeks lead­ing to Christ­mas which of­ten see stronger sales.

Ex­porters and dual-ac­tiv­ity firms bared damp­ened spir­its in the face of higher over­head costs es­pe­cially for fuel, which touched three-year highs in Oc­to­ber be­fore re­cov­er­ing the past few weeks.

At the same time, im­porters were more up­beat due to higher re­mit­tance in­flows and in­creased de­mand in time for the hol­i­days.

Across sec­tors, in­dus­try firms posted the big­gest drop in con­fi­dence amid volatile global oil prices and higher im­port costs.

Those in ser­vices also turned less op­ti­mistic, while those in whole­sale and trade grew more bullish with ex­pec­ta­tions of a more ro­bust de­mand dur­ing the Christ­mas and har­vest sea­sons.

Out­look for the first quar­ter of 2019 sim­i­larly turned softer at 29.4% from 42.6% pre­vi­ously, in line with the usual slack in de­mand af­ter the hol­i­days.

The BES, which cov­ered 1,463 com­pa­nies on Oct. 1-Nov. 23, com­pared the num­ber of firms op­ti­mistic about their eco­nomic out­look ver­sus those who were pes­simistic.

CON­SUMERS NEG­A­TIVE

A sep­a­rate sur­vey re­vealed that Filipino house­holds grew even more pes­simistic this quar­ter, as the con­fi­dence score posted the big­gest drop in 11 years.

The Con­sumer Ex­pec­ta­tions Sur­vey (CES) yielded a net -22.5%, plung­ing from a -7.1% read­ing in the third quar­ter and rev­ers­ing from pos­i­tive 9.5% read­ing a year ago. The

in­dex score is the low­est read­ing in four years.

Mr. Ale­gre blamed the bear­ish con­sumer out­look to higher prices of goods, low salaries, higher house­hold ex­penses and higher un­em­ploy­ment.

A bleaker out­look was seen for eco­nomic con­di­tion, fam­ily fi­nan­cial sit­u­a­tion and fam­ily in­come.

“Con­sumer out­look across in­come groups also weak­ened for the cur­rent quar­ter. The higher prices of goods and house­hold ex­pen­di­tures, low in­come and the high un­em­ploy­ment rate were the com­mon rea­sons driving the weaker out­look across in­come groups for Q4 2018,” Mr. Ale­gre ex­plained.

Fewer fam­i­lies said they are likely to spend more the next quar­ter, and less house­holds saw the last three months of 2018 as a good time to make big-ticket pur­chases. In­stead, they chose to use their money on food and other ba­sic needs.

The sur­vey cov­ered 5,609 house­holds na­tion­wide on Oct. 1-13.

Busi­ness and con­sumer con­fi­dence are said to have a high cor­re­la­tion to over­all eco­nomic growth, as their tra­jec­tory of­ten fol­lows do­mes­tic ex­pan­sion.

But BSP Deputy Gover­nor Diwa C. Guini­gundo said this may not hold true this time.

“In both cases, the con­sumer and busi­ness ex­pec­ta­tions re­spon­dents didn’t have the ben­e­fit of know­ing the de­cline in in­fla­tion for Novem­ber,” Mr. Guini­gundo ex­plained.

He added that since then, the prices of oil and rice have also im­proved, which would ul­ti­mately drive down in­fla­tion go­ing into 2019.

Over­all price in­creases soft­ened to six per­cent last month from a nine-year peak of 6.7% in Septem­ber and Oc­to­ber, con­firm­ing ex­pec­ta­tions that in­fla­tion is on its way back to the cen­tral bank’s 2-4% tar­get next year.

Both busi­nesses and con­sumers also ex­pected in­fla­tion to rise fur­ther, in­ter­est rates to trend higher and the peso to weaken even more.

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