Business confidence less upbeat in Q3 – BSP survey

Improvements in Q4

The unlikely combination of a rainy season and El Niño weather phenomenon has Filipino businessmen having a “less buoyant” confidence level for the third quarter but sentiments will improve when the last quarter period kicks in, according to a central bank survey.

Based on the Bangko Sentral ng Pilipinas’ (BSP) Business Expectations Survey (BES) for the third quarter, the overall confidence index dropped to 41.4 percent versus 49.2 percent in the previous quarter.

The less upbeat outlook was due to the expected slack in demand during the rainy season, lower crop production because of the El Niño dry spell, and the closed fishing season in Davao (July to September). The decline in consumer spending as most funds are allotted for education expenses also contributed to the less buoyant sentiments.

However, for the next quarter, the BSP said the overall confidence index improved to 53.1 percent compared to 47.3 percent in the previous survey as businessmen expect sustained economic growth in the last quarter of the year.

The positive results were due to the following: increased consumer demand during the holiday, harvest and milling seasons; increase in sales and orders; business expansion in retail trade, manufacturing, finance and BPO services; improvements to agriculture production such as in poultry and tuna fishing; sustained remittance flows; and election-related spending.

“(Businessmen) also cited the prevailing fa-

vorable macroeconomic conditions (for example, low inflation partly as a result of declining oil prices and lower peso) which boosted their business confidence for the next quarter,” said the BSP.

Inflation rate is widely expected to be below the BSP’s two percent to four percent target band for the year while there are more respondents who think the peso vis-à-vis the US dollar will appreciate.

Generally, the BSP said companies’ third quarter outlook is weaker because of a decline in outlook of industries such as electricity, gas, and water supply, agriculture, fishery and forestry subsectors. But, the outlook on the business operations of firms in the construction, services, wholesale and retail trade sectors were more upbeat.

Based on the BES results, the per- centage of industrial companies that said they have expansion plans have also increased to 32.9 percent from 29.1 percent in the previous quarter. Similarly, the employment outlook index also improved to 22.3 percent from 20.7 percent in the second quarter.

Businessmen expect better financial conditions and access to credit as well. “(They were) of the view that their financing requirements could be met through available credit as respondents reported easy access to credit,” said the BSP.