BUSINESS and consumer sentiment in the Philippines improved in recent months, with firms and households becoming less pessimistic amid expectations of stronger demand, higher earnings and improved employment prospects, according to separate surveys by the Bangko Sentral ng Pilipinas (BSP).
The BSP’s August 2026 Business Expectations Survey showed the overall business confidence index for the current month improved to -10.9 from -20.3 in July, while the outlook for the next three months turned more positive at 24.6, from 3.7 previously. The 12-month outlook also rose to 36.4 from 29.4.
The central bank said the improvement in August business sentiment was mainly driven by higher demand for goods and services, cited by 80 percent of respondents with a less pessimistic outlook. Businesses also pointed to stronger demand for essential commodities, loan products and construction activities.
Firms expect conditions to strengthen further toward the end of the year. For November, businesses cited stronger demand for consumer and financial products and services, as well as increased activity during the holiday and rice harvest seasons.
Over the next 12 months, businesses expect improving consumer spending in tourism, construction, education and financial activities to support growth. Easing inflation, improved business operations and investor confidence were also cited among the factors supporting the more favorable outlook. The business outlook, however, remains tempered by operating constraints.
Domestic competition, insufficient demand and high interest rates were identified as the top constraints facing firms. Financial conditions were described as less tight, although access to credit remained slightly tighter.
Average capacity utilization among industry and construction firms edged up to 69 percent in August from 68.6 percent in July.
Employment prospects improved, with the employment outlook index rising to 30.7 in August from 9.0 in July, while the share of industry firms with expansion plans declined to 17.1 percent from 20.8 percent.
Consumers likewise became less pessimistic in the third quarter.
The BSP’s Q3 2026 Consumer Expectations Survey showed the overall consumer outlook index for the current quarter improved to -29.8 from -42.0 in the second quarter. The outlook for the next quarter also improved sharply to -0.8 from -16.3, while the 12-month outlook turned more positive at 9.1 from 0.2.
The improvement was largely associated with expectations of higher earnings, new income sources and stable jobs. For the next quarter, consumers cited higher earnings, new income sources and more job opportunities as key reasons for their improved outlook.
Household financial sentiment also improved, although consumers remained cautious. The BSP said the spending outlook became less optimistic, while buying intentions for big-ticket items became less pessimistic. Saving intentions turned positive, but borrowing intentions became more pessimistic.
Inflation remains a common concern for both businesses and consumers. Businesses placed their year-ahead inflation
expectations at 5.4 percent, slightly lower than July but still above the BSP’s four percent upper bound. Firms cited continued oil price increases, uncertainty surrounding the Middle East conflict and declining peso purchasing power as major concerns.
Consumers, meanwhile, raised their year-ahead inflation expectations to four percent from 3.3 percent in the second quarter, above the BSP’s three percent inflation target but still within the four percent tolerance ceiling.
Rising food and utility prices and tighter supply conditions were among the concerns cited by households.
The surveys covered 501 firms nationwide for August and 5,476 households for the third quarter, providing a broad gauge of business and household expectations. / KOC