The Market Monitor Minding the Nation's Business
The country’s consumer outlook remained positive for the first quarter (Q1) of 2020, even as the overall confidence index (CI) remained positive although marginally lower at 1.26% from 1.31% for Q4 2019.
The CI is computed as percentage of households that answered in affirmative less percentage of households that answered in negative with respect to their views on a given indicator. A positive CI indicates a favorable view, except for inflation rate, peso-borrowing rate, unemployment, and change in prices, where a positive CI indicates the opposite. Overall consumer CI measures the average direction of change in three indicators — overall condition of the economy, household finances, and household income.
Respondents attributed their positive sentiment for Q1 2020 to: (a) availability of more jobs, (b) effective government policies and programs, particularly the anti-drug campaign and Senior Citizens Act, and (c) good governance. Positive sentiment was mitigated by: (a) faster increase in prices of goods, (b) low income, (c) occurrence of typhoon, volcanic eruption, and COVID-19 outbreak, and (d) higher household expenses.
For Q2 2020 and the next 12 months, consumers were less buoyant as CIs declined, though remaining positive, at 9.2% (from Q4 2019 result of 15.7% for Q1 2020) and 19.9% (from the Q4 2019 result of 26.4% for the next 12 months), respectively. Consumers cited their anticipation of: (a) faster increase in the prices of goods, (b) low or no increase in income, (c) natural calamities and virus outbreak, and (d) higher household expenses as reasons for their less upbeat outlook for Q2 2020 and the next 12 months.
Consumer confidence across three component indicators is mixed for Q1 2020
For Q1 2020, consumer sentiment on the three component indicators was mixed as the outlook on the family’s financial situation turned optimistic, steady on family income, and less positive on the country’s economic condition compared to Q4 2019 survey results. For Q2 2020 and the next 12 months, consumer sentiment across component indicators was less favorable compared to Q4 2019 survey results.
Consumer outlook improves for low-income group but less buoyant for middle- and high-income groups for Q1 2020
By income group, steady overall CI for Q1 2020 stemmed from less pessimistic outlook of low-income group and less buoyant sentiment of middle and high-income groups. Low-income group cited expectations of improvement in peace and order situation and better road infrastructure as reasons for their more favorable outlook. Less optimistic sentiment of middle- and high-income groups was due to: (a) faster increase in prices of goods, (b) low income, (c) higher household expenses, and (d) typhoon and other natural calamities.
For Q2 2020 and the next 12 months, the sentiment of consumers across income groups was generally less upbeat compared to the Q4 2019 survey results.
Consumers’ spending outlook declines for Q2 2020
The country’s spending outlook index of households on basic goods and services declined to 33.3% for Q2 2020 from the Q4 2019 survey result of 37.1%, indicating that growth in consumer spending may slow in next 3 months.
This suggests that while more respondents continued to expect higher spending on basic goods and services, the number that said so decreased compared to Q4 2019 survey result for Q1 2020. Households’ spending outlook was mixed. Fewer respondents expected higher spending on: electricity; food, non-alcoholic and alcoholic beverages, and tobacco; fuel; personal care and effects; transportation; education, recreation and culture; clothing and footwear; restaurants and cafes; and communication. More respondents expect an increase in expenditures on medical care, but steady for water, house rent, and furnishing.
Percentage of households that considered Q1 2020 as a favorable time to buy big-ticket items declined to 24.2% from 27.2% recorded in Q4 2019. Less bullish outlook on buying sentiment was evident across three big-ticket items, namely, consumer durables, motor vehicles, and house & lot. Respondents’ waning buying sentiment was attributable to: (a) low/insufficient income, (b) current acquisition of consumer durables, and (c) shift of spending priority on food and other basic needs (from big-ticket items). Percentage of households that considered the next 12 months as a favorable time to buy big-ticket items declined to 6.5% from 9.8% in Q4 2019.
Percentage of households with savings for Q1 2020 rises to all-time high
For Q1 2020, percentage of households with savings reached an all-time high, since Q1 2013, at 37.8%, from 36.3% in Q4 2019. Higher number of savers was due to more households with savings in middle-income group, which more than offset decrease in number of savers in high- and low-income groups. Respondents saved money for: (a) emergencies, (b) health & hospitalization, (c) education, (d) retirement, (e) business capital & investment, and (f) purchase of real estate.
Percent of households that kept their money in different types of savings institutions climbed to record highs for Q1 2020, 73.9% in banks, 60.2% at home, and 50.9% in cooperatives, paluwagan, other credit/loan associations, or investments. When asked if the household would set aside money for savings in Q1 2020, percentage of respondents that said yes was lower at 41.8% compared to 45.4% in Q4 2019.
Consumers expect inflation, interest, and unemployment rates to increase and exchange rate to depreciate in Q1 2020
Survey results showed that consumers anticipated interest rates to increase and the peso to depreciate for Q1 2020, Q2 2020, and the next 12 months. Respondents expected unemployment rate to rise for Q1 2020 and Q2 2020, but to decline in the next 12 months. Households predicted that the rate of increase in commodity prices will remain within the government’s 2 to 4% inflation target range for 2020 and 2021 at 2.2% for Q1 2020, 2.3% for Q2 2020, and 2.6% for the next 12 months.
OFW households that use their remittances for savings/investments increase for Q1 2020
Of the 494 households in the survey that received OFW remittances for Q1 2020, 93.9% used the remittances they received to purchase food and other household needs. The percentage of OFW households that apportioned their remittances for education (66.8%), medical expenses (51%), savings (44.7%), purchase of consumer durables (23.3%) and house (13.6%), and investments (6.1%) increased compared to Q4 2019 survey results. Meanwhile, the proportion of OFW households that allotted part of their remittances for debt payments (17.2%) and purchase of motor vehicles (5.9%) decreased compared to the Q4 2019 survey results.
1 out of 3 households availed of a loan in last 12 months, of which 89% experienced ease in debt application
One out of three households (30.2%) reported they availed of a loan in the last 12 months. With regard to access to loan, 89% of the respondents found it easy to apply for a loan, while others found it hard due to the following concerns: (a) numerous requirements or difficulty in accomplishing requirements, (b) limited number of loan providers, and (c) long processing.
One out of 10 respondents (10.1%) intend to apply for a loan in Q2 2020 and perceived that access to credit will be easy. Of those surveyed, 9.8% said they would take a loan in the next 12 months, of which 92% think their credit application would be easy.
About the survey
The Q1 2020 CES was conducted from 29 January – 10 February 2020. The CES samples were drawn from the Philippine Statistics Authority’s Master Sample of Households, which is considered as representative sample of households nationwide. CES sample households were generated using a stratified multi-stage probability sampling scheme. For the Q1 2020 CES, 5,555 households were surveyed. Out of these households, 2,770 (49.9%) were from NCR and 2,785 (50.1%) from AONCR.
Of the said sample, 5,406 households responded, equivalent to 97.3% (from 96% in Q4 2019). Respondents consist of 2,722 households in NCR (98.3% response rate) and 2,684 households in AONCR (96.4% response rate). Majority of respondents were from middle-income group (40.8%), followed by high-income group (29.9%) and low-income group (29.2%).