BSP finds businesses less bullish, consumers more pessimistic in Q4

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.