Business, consumer outlook falls – BSP survey

Due to inflation, peso concerns

Filipino businessmen and consumers were less optimistic in the fourth quarter on the back of heightened concerns on inflation, weak peso, higher interest rates and increased fuel costs.

The Bangko Sentral ng Pilipinas (BSP) yesterday simultaneously released survey reports on the Business Expectations Outlook (BES) and Consumer Expectations Outlook (CES) which basically have the same low confidence index during the survey quarter and because of similar worries, including higher commodity prices when there are no corresponding increase in salary or sources of income.

The BES overall confidence index (CI) dropped to 27.2 percent in the latest survey from 30.1 percent in the third quarter, it is the lowest level since the first quarter 2010.

Even the expected higher demand during the Christmas season wasn’t enough to encourage optimism among businessmen and consumers.

Business outlook was “less buoyant” due to: Higher inflation driven by rising raw material costs and global oil prices; weakening peso; higher interest rates or borrowing costs; decrease in volume of sales and orders; and lack of supply of raw materials.

Consumer CI overall further fell to -22.5 percent in the fourth quarter versus the previous quarter’s -7.1 percent, it is also the lowest reading since the fourth quarter 2014, and it was the biggest decline by 15.4 percentage points since the nationwide survey started 2007. The overall consumer Cl measures the average direction of change in three indicators – overall condition of the economy, household finances, and household income.

The BSP said consumers were less optimistic because of these concerns: higher prices of commodities; low salary/ income; increase in household expenses; no increase in income; and upsurge in the number of unemployed persons.

Consumers expect inflation and interest rates to increase and the exchange rate to depreciate for the next 12 months. As such, consumers’ low CI level extends to the next three months and indicated a less buoyant outlook as well for the next quarter and the year ahead. “Consumer confidence on the three component indicators weakened except on family income for the year ahead, which remained steady. Notably, the CIs for family income and family financial situation reverted to negative territory for the current quarter and the next quarter, respectively,” according to the BSP.

As for business sentiments, the less bullish business conditions are expected to continue until the first quarter of 2019 and the central bank said that again, this is the lowest next quarter reading since third quarter of 2009.