BUSINESSES are less upbeat while Filipino consumers turned pessimistic about the third quarter, the Bangko Sentral ng Pilipinas (BSP) reported on Friday, June 28, 2024.
For the third quarter, the confidence index (CI) turned negative at -0.4 percent from 2.7 percent in the first quarter of 2024.
The respondents’ pessimistic outlook for the next quarter was attributed to their expectations of a faster increase in the prices of goods and higher household expenses, lower income and fewer available jobs.
Meanwhile, the country’s business confidence weakened as the overall CI fell to 43.7 percent from 48.1 percent in the first quarter of 2024.
The firms’ less buoyant outlook for the third quarter was attributed to their expectations of lower demand for products and services such as hardware and construction materials, food supplements and other consumer goods and medical services; elevated inflation and higher commodity prices; the start of off-milling and rainy seasons; slower economic growth; and the adverse impact of the ongoing conflicts abroad.
Consumer
Consumer spending is less upbeat for the third quarter.
The spending outlook index of households on goods and services for the third quarter of 2024 was less upbeat as the CI declined to 39.6 percent from 41.3 percent in the previous quarter’s survey results.
In particular, a slower pace of spending is noted on consumer items like food, non-alcoholic and alcoholic beverages, tobacco, clothing and footwear, house rent and furnishings, fuel, medical care, transportation, education, recreation and culture. On the contrary, spending is expected to increase at a faster rate for water, electricity, communication, restaurants and cafés and personal care and effects.
In terms of inflation, the report said households expect that inflation may rise, albeit at a more moderate pace in the third quarter of 2024. This means that even if the number of respondents who expect higher inflation continued to outnumber those who said otherwise during these periods.
Consumers cited higher household spending for food, limited supply of goods and services, concerns over the effectiveness of government policies and programs in addressing elevated inflation and bad weather conditions as reasons for their inflation expectations.
BSP’s Consumer Expectation Survey was conducted from April 1 to 15, 2024, with 5,475 households surveyed.
Business sentiment
For the third quarter, CI across all regions outside the NCR was generally less positive. On a regional level, companies in Ilocos, Cagayan Valley, Central Luzon, Western Visayas, Central Visayas, Eastern Visayas, Northern Mindanao, Davao Region and Soccsksargen were less optimistic for the third quarter due to their expectations of the adverse impact of the incoming rainy season and other weather-related disturbances; decline in demand for medical and manpower services due to a fewer number of clients; elevated inflation; and slower economic expansion.
However, companies in Calabarzon and Mimaropa, Bicol, and Zamboanga Peninsula were more optimistic for the third quarter due to their expectations of a seasonal uptick in demand for loan products, hygiene and personal care items, plastic and metal works, transportation and clothing apparel during the opening of classes; improved business conditions and operations; and easing price pressures.
The Business Expectation Survey was conducted from April 5 to May 23, 2024, with 1,526 firms surveyed nationwide.
In terms of employment, the report said, the pace of hiring and industry expansion plans may slow down for the third quarter. Businesses also expect that the peso may depreciate against the U.S. dollar in the third quarter, while they anticipate that inflation and peso borrowing rates may also rise.
Inflation may settle at 4.4 percent in the third quarter. Companies also anticipate that the peso-dollar rate may average at P56.63/US$1. / KOC