Business upbeat over poll spendings effect

Business confidence is up, based on the quarterly Business Expectation Survey (BES) of the Bangko Sentral ng Pilipinas (BSP).

Business outlook on the economy was more bullish for the second quarter, with the overall confidence index (CI) rising to 48.7 percent from 41.9 percent in the first three months, showed the BES.

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

The BSP said the rise in optimism was due to election-related spending in the run-up to the national elections, sustained increase in orders and projects leading to higher volume of production, anticipated increase in demand during summer with the expected influx of both local and foreign tourists and enrollment periods and introduction of new and enhanced business strategies and processes.

Respondents also cited as factors for their increased confidence the expansion of businesses and new product lines, and improving conditions in the local economy as well as in some advanced economies, particularly in Asia.

“Their more positive outlook was further driven by expectations of more favorable macroeconomic conditions in the country (particularly, low inflation and stable interest rates), and sustained foreign investment inflows,” according to the BSP.

The sentiment of businesses in the Philippines mirrored the improving business outlook in South Korea, Canada, France, and the Netherlands but was in contrast to the deteriorating views of those in the US, the UK, Germany, China and Australia, it added.

For the third quarter, the outlook showed a slight drop in the CI to 45.3 percent from 49.6 percent.

Respondents cited the following factors as reasons behind their less sanguine outlook: interruption of business activities during the rainy season, lower consumer demand as households prioritize enrollment expenses, and expectations of higher oil prices.

The outlook of businesses involved in international commodity trading turned broadly more favorable for second quarter.

Among business types, importers and domestic-oriented firms were the most optimistic.

The outlook of exporters improved while that of dual-activity firms was broadly steady.

Business sentiment was generally upbeat across sectors but construction, while remaining positive, turned less favorable.

For the third quarter, the outlook across sectors was less buoyant due to the expected slack in demand during the rainy season.

The services sector was the most optimistic among all sectors due to the usual uptick in demand during summer and harvest seasons, expected brighter prospects with the increase in demand due to election-related spending and given the positive impact of the elections on the economy, low oil prices, improved marketing strategies, and new investment opportunities.

The outlook of firms in the wholesale and retail trade sector was more upbeat.

Respondents attributed their optimism for the current quarter to expectations of generally more robust demand during summer and enrollment seasons, a surge in spending over the course of the election-campaign period, and a more conscious effort to achieve target sales in the automobile industry.

Industry firms’ outlook was bullish for the current quarter, particularly in the mining and quarrying and manufacturing sub-sectors.

Respondents to the suvey showed more optimism as a result of higher election-related production activities (such as printing/manufacturing of campaign materials and giveaways), robust consumer demand during summer, and innovations in product design and quality.

Meanwhile, the outlook of firms in the construction sector was less sanguine for Q2 2016.

The lull in construction activities might be due to the wait-and-see attitude of businesses during the transition period to the new administration. The employment outlook index for the next quarter declined to 23.8 percent from 27.2 percent in the last quarter’s survey.

This indicates that more firms will continue to hire new employees than those that said otherwise, although the number of new hires could decrease compared to the previous quarter’s survey.

Moreover, the percentage of businesses with expansion plans in the industry sector for the third quarter decreased to 30.3 percent from 31.3 percent a quarter ago.

These developments are consistent with the lower outlook in the industry sector for the next quarter.

The BES was conducted during April 1 to 17.

There were 1,482 firms surveyed nationwide. Respondents were drawn from the combined list of the Securities and Exchange Commission’s Top 7,000 Corporations in 2010 and Business World’s Top 1,000 Corporations in 2014, consisting of 587 companies in NCR and 895 firms in AONCR, covering all 17 regions nationwide.