Consumer expectations weaken in Q4

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Sunday, December 15, 2013


UNLIKE the business sector, consumers’ expectations for the final quarter of the year weakened, citing expected price increases and issues concerning the priority development assistance fund (PDAF) as reasons for the weakening confidence, the central bank’s Consumer Expectations Survey for the fourth quarter of 2013 showed.

These sentiments do not take into account the effects of the magnitude 7.2 earthquake and super typhoon Yolanda, as the survey was conducted nationwide between Oct. 1 and Oct. 12. The earthquake hit Bohol and Cebu last Oct. 15 while the typhoon ravaged the Visayas region last Nov. 8.

The Bangko Sentral ng Pilipinas’ survey measured an overall confidence index of -21.3 percent, a drop from the previous quarter’s index of -7.9 percent and still lower from the -10.4 percent during the same quarter last year.

Reasons

Respondents cited high commodity prices, adverse weather conditions leading to poor harvests, weak public governance in relation to the PDAF scandal and peace and order concerns in Mindanao as reasons for their weak sentiments.

The index is the difference between respondents with positive views against those with negative views. The BSP surveyed 5,512 households around the country, with 49.8 percent from the National Capital Region and the rest spread out across the Philippines.

For the next quarter and the whole of 2014, respondents with favorable views outnumbered those with unfavorable views, although the number decreased from the previous survey.

The survey reported that the sentiments of the country’s consumers mirror those of Germany, Hong Kong, India, Japan, Malaysia, Thailand and the United States.

The confidence index is measured using three indicators–the country’s economic conditions, family financial situation and family income.

Issues

There was an overall pessimistic view of the country’s economic conditions, mostly due to issues concerning the PDAF. Across income groups, low and middle income households had a decline in their outlook while those from higher income households were more optimistic for this quarter.

Many expect unemployment to rise in 2014 and the peso to appreciate against the US dollar with remittances and foreign investments pouring into the country.

For next year, more of the low income households were pessimistic about their family finances although they were more optimistic about their family income. There was higher optimism among middle income households pertaining to their financial conditions while high income households reported favorable views on their income and finances.

The low income group, with household incomes of less than P10,000, made up 48 percent of the households surveyed while middle income households made up 37.6 percent. High income households, which earned over P50,000, made up 14.4 percent.

As for purchases, buying conditions for real property and consumer durables were upbeat but there was a decline for motor vehicles. Most of the respondents consider real property a good investment while many will be stepping up on consumer durables, especially in entertainment and convenience.

The survey reported upbeat buying intentions for 2014 for big-ticket items, which the central bank believes is consistent with the expected improvement in family income across groups.

Remittances

The households that said they are saving money increased, especially in the low and middle income groups. They cited the need for emergency funds, health and hospitalization, retirement, business capital and investment and education as reasons for saving. Majority kept bank deposit accounts for their savings. The survey found 34.6 percent of respondents expected to save money, with 40.4 percent of them expected to save 10 percent of their income.

Of the over 5,000 households surveyed, 490 of these received remittances from overseas Filipinos.

The respondents from these households said the remittances they received were used to purchase food, pay for education, medical services and debt payments. A high 41.6 percent also used remittances for savings, higher than the previous quarter’s 34.3 percent, while 11.2 percent allocated remittances for investment. The report said this is the highest since 2007, as the figure climbed from 4.8 percent in the third quarter survey.

Published in the Sun.Star Cebu newspaper on December 16, 2013.

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