FILIPINO consumers remained broadly optimistic about the economy in early 2026 and over the next 12 months, even as business confidence weakened sharply, underscoring a growing divergence in sentiment as firms brace for slower demand, higher inflation and policy risks, central bank surveys showed.
The Bangko Sentral ng Pilipinas (BSP) said its Consumer Expectations Survey showed the overall consumer outlook index for the first quarter of 2026 remained positive at 3.6 percent, while sentiment for the next 12 months stood at 11.8 percent, despite both indices easing from the previous quarter.
The BSP said households’ forward-looking optimism was tempered by concerns over rising inflation, lower household income, unfavorable weather conditions and natural calamities, as well as governance-related issues such as graft and the delivery of government services.
Confidence in current conditions, however, deteriorated sharply. The overall current-quarter consumer confidence index fell to -22.2 percent in the fourth quarter of 2025 from -9.8 percent in the previous quarter, as pessimists outnumbered optimists.
All three components of consumer confidence – expectations for the overall economic conditions, family financial situation and family income – declined in the fourth quarter. The index for overall economic conditions slid to -48.4 percent, its lowest level in five years, while the family financial situation index dropped to -14.6 percent. The family income index slipped back into negative territory at -3.5 percent after three consecutive quarters of positive readings.
Stronger spending
Despite weaker confidence, households signaled firmer spending plans. The spending outlook for goods and services in the first quarter of 2026 improved, with the relevant index rising to 43.7 percent, supported by expectations of higher spending on food, housing-related items, utilities, transport, education, health, and recreation. Saving sentiment also turned positive, with more households planning to set aside at least 10 percent of their monthly income.
Business confidence
In contrast, business sentiment pointed to a more cautious start to 2026.
The BSP’s Business Expectations Survey showed the next-quarter business confidence index fell to 23.7 percent in the fourth quarter of 2025 from 49.5 percent in the previous, marking the weakest outlook for the next quarter since the height of the Covid-19 pandemic. Sentiment for the next 12 months also softened, with the year-ahead confidence index easing to 40.4 percent from 48.1 percent.
Firms cited expectations of a post-holiday slowdown in sales and business activity, rising inflation pressures, peso depreciation and concerns over governance and corruption allegations as weighing on confidence for early 2026 and beyond.
“Businesses are factoring in softer demand after the holidays, tighter financial conditions and policy uncertainty,” the BSP said.
Despite the downbeat forward view, confidence in current conditions improved. The confidence index for the fourth quarter of 2025 rose to 29.7 percent from 23.2 percent, supported by stronger consumer spending during the holiday season, expansion plans, process improvements and relatively benign inflation.
By sector, firms in industry, services, and wholesale and retail trade reported improved confidence in the fourth quarter but turned more cautious for the first quarter of 2026 and the next 12 months. Construction firms were relatively more optimistic, citing expectations of new projects.
Employment
Employment prospects also softened. The employment outlook index for the first quarter of 2026 slipped to 12.2 percent from 18.5 percent, indicating that firms still plan to hire but at a slower pace, while year-ahead hiring intentions were broadly steady.
Businesses also expect tighter financial conditions ahead. Indices on financial conditions and credit access turned more negative, signalling expectations of weaker cash positions and more difficult access to credit.
On key indicators, firms expect the peso to weaken further, with the exchange rate seen averaging around P57.96 pesos per dollar in the first quarter of 2026 and P57.94 over the next 12 months. Businesses also anticipate higher borrowing costs and rising inflation, driven by fuel and commodity prices, peso depreciation and the lingering effects of natural disasters.
The BSP said the contrasting survey results highlight risks to the growth outlook in early 2026, as resilient household spending expectations collide with more cautious business investment and hiring plans.
The consumer survey was conducted from Oct. 1 to 13, 2025 among about 5,000 households nationwide, while the business survey covered around 7,000 top corporations from October to November, providing an advance view of economic conditions in the months ahead. / KOC