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One of the buildings in the Bangko Sentral ng Pilipinas complex on Roxas Boulevard in Pasay City. (Photo: Alvin I. Dacanay)

Business turns upbeat for Q4

By Riza Lozada

Business sentiment turned more upbeat for the fourth quarter, with the Bangko Sentral ng Pilipinas (BSP) overall confidence index (CI) rising to 43.3 percent from 37.9 percent in he previous quarter indicating the number of optimists increased, the results of the BSP Business Expectations Survey released yesterday showed.

The recent quarter’s confidence level was also better compared to the figures a year ago.

The confidence index is computed as percentage of firms that answered in the affirmative less the percentage of firms that answered in the negative regarding their views on a given indicator.

Respondents cited as factors behind their more buoyant outlook during the fourth quarter: expected increase in orders and consumer purchases during the Christmas holidays; rising number and expansion of businesses; higher disbursements for the government’s infrastructure and other development projects; favorable macroeconomic conditions in the country particularly manageable inflation and low interest rates; and expansion of export markets and stronger demand for local products.

The favorable sentiment of businesses mirrored the more bullish outlook in Australia, Canada, Germany, and Indonesia, but was in contrast to the less favorable views of those in the US, UK, Hong Kong, South Korea, New Zealand and Thailand, and steady outlook in France.

Outlook on the first quarter of next year, however, was less optimistic, with the next quarter CI declining to 39.7 percent from 51.3 percent in the previous quarter’s survey results.

Respondents attributed their less positive outlook mainly to the usual slowdown of demand after the holiday season. Other reasons cited by firms were lag in business transactions at the beginning of the year (e.g., delay in renewal of contracts and drydock season for the shipping industry), stiffer business competition, concerns on the effect of the new excise tax rates to the automobile industry, and higher inflation.

The sentiment of businesses across trading types was mixed for fourth quarter.
Among business types, exporters were the most bullish, maintaining a record-high confidence level for the second consecutive quarter at 50 percent.

Likewise, domestic-oriented firms as well as importers were more optimistic. However, the outlook of dual-activity firms was less upbeat. For the quarter ahead, the sentiment across different types of businesses was less optimistic.

The services and wholesale and retail trade sectors are more confident while industry and construction are less positive Business sentiment across sectors was also mixed for the final quarter. Confidence was highest in the services sector, followed by wholesale and retail trade while those in the industry and construction sectors were less favorable.

Firms’ sentiment across sectors was less optimistic for the coming quarter due largely to the usual slack in demand after the holiday season, except for the construction sector which remained bullish.

Sentiment was high across the services sub-sectors, with hotels and restaurants posting the highest confidence index, reaching a two-year record-high at 73 percent.

The positive sentiment of the wholesale and retail trade firms was driven by expectations of generally more robust demand during Christmas and main harvest seasons.

Meanwhile, in the industry sector, the pessimism of firms in the manufacturing and mining and quarrying sub-sectors outweighed the more optimistic outlook of firms in the agriculture, fishery and forestry, and electricity, gas and water supply sub-sectors. Likewise, construction firms’ outlook for the current quarter was less favorable as firms take their cue from the government’s rollout of infrastructure projects.

The outlook of firms about their own business operations improved for the fourth quarter from the previous quarter. The sectoral outlook of firms on the volume of business activity and total orders booked was consistent with those at the national level, more bullish for the services and wholesale and retail trade sectors but less upbeat for industry and construction.

The employment outlook index for the next quarter declined to 24.7 percent from 27.3 percent in the last quarter’s survey.

This indicates that more firms will continue to hire new employees than those that indicated otherwise even as the number of firms with hiring intentions declined relative to a quarter ago.

The percentage of businesses with expansion plans in the industry sector for the first quarter decreased to 31.1 percent from 32.8 percent a quarter ago.

Meanwhile, the average capacity utilization (in the industry and construction sectors) for the fourth quarter was slightly lower at 76 percent from 76.7 percent in the previous quarter.

The financial conditions index remained in negative territory at negative 0.9 percent for the final quarter from negative one percent in the previous quarter which means that firms that expected tighter financial conditions continued to outnumber those that said otherwise.

However, firms were of the view that their financing requirements could be met through available credit as respondents reported easy access to credit.

The survey results showed that businesses anticipated inflation to increase but to remain within target, peso to depreciate, and interest rates to go up for the current and next quarters.

Respondents who expected inflation to go up continued to outnumber those that held the opposite view for the current and next quarters.

The number of respondents with views of higher inflation increased for last quarter but declined for the initial quarter of next year relative to the previous quarter’s survey results.

Businesses anticipated the rate of increase in commodity prices to stay within the government’s two to four percent inflation target range for 2017 and 2018, at 3.1 percent for Q4 2017 and 3.2 percent for Q1 2018 (unchanged from the previous quarter’s survey results).

Respondents also anticipated the peso to depreciate for final quarter of 2017 and the first quarter of 2018. Meanwhile, the percentage of respondents that expected higher interest rates increased compared to those in the previous quarter’s survey.

The BSP said the recent BES was conducted during October 2 to November 20 among 1,473 firms nationwide.

Respondents were drawn from the combined list of the Securities and Exchange Commission’s (SEC) top 7,000 corporations in 2010 and Business World’s Top 1,000 Corporations in 2015, consisting of 585 companies in the National Capital Region (NCR) and 888 firms in areas outside NCR (AONCR) covering all 16 regions nationwide.

The survey response rate for this quarter was higher at 84 percent from 83.6 percent in the previous quarter.

The response rate was higher for both NCR at 80.3 percent from 80 percent in the previous quarter and AONCR at 86.4 percent compared to 86 percent in the previous quarter.

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