Consumers gloomy due to El Niño—BSP survey

By Luis Leoncio

Consumers remain gloomy as pessimists continue to dominate in the quarterly consumer expectation survey of the Bangko Sentral ng Pilipinas (BSP), with the confidence index (CI) for the second quarter sinking to a negative 6.4 percent from negative 5.7 percent in the first quarter. 

The BSP said that since the survey started in the first quarter of 2007, negative sentiment was consistent, but the latest figure was the second best reading.

While pessimists continue to outnumber optimists, the margin remained narrow, the BSP said.

The CI is computed as the percentage of households that indicated optimism in their economic outlook, less households that answered in the negative with respect to their views on a given indicator.

A positive CI indicates a favorable view, except for the inflation rate, the peso-borrowing rate, unemployment and change in prices, where a positive CI indicates the opposite.

The overall consumer CI measures the average direction of change in three indicators – overall condition of the economy, household finances, and household income, the survey showed.

The predominant concern among respondents was the adverse effects of El Niño on crop production that resulted in poor harvest.

But respondents have a favorable outlook as a result of an increase in the number of employed family members, increasing family income due to higher salary and stronger business activity, lower household expenses as well as debt payments, and improvements in the peace and order situation.

The other factors cited by respondents that helped maintain their confidence for the current quarter were assistance from government such as the Pantawid Pamilyang Pilipino Program (4Ps), and the coming change of administration as well as the election of new government officials.

For the third quarter, consumer sentiment further weakened as the CI declined to 5.6 percent from 9.1 percent in the previous quarter’s survey, but improved for the year ahead to 26.6 percent from 25.4 percent a quarter ago.

According to respondents, their less sanguine outlook for the next quarter stemmed from expectations of lower harvests, slower business activities during the rainy season and expectations of higher expenses for their children’s education such as tuition fees, school supplies, and student allowances.

For the year ahead, consumers attributed their more optimistic outlook to the change in administration as well as the election of new government officials, expected improvements in the peace and order situation, and availability of more jobs in both local and foreign markets.

Consumer confidence is measured across three component indicators, namely, the country’s economic condition, family financial situation and family income.

For the second quarter, consumer outlook on the country’s economic condition weakened.

However, this was offset by the improved sentiment on family finances and income, which registered all-time high CIs at negative 4.4 percent and 0.9 percent, respectively, since the start of the survey.

Consumers cited additional income, more working family members and brisker business as reasons for their optimism.

Conversely, consumer confidence turned less favorable due to worries on family financial situation and family income but improved on the overall economic condition of the country.

For the year ahead, optimism prevailed among consumers as their outlook on the economic condition of the country turned more buoyant with the CI at 28.6 percent while the positive sentiments on family finances and income registered record highs at 24.9 percent and 26.3 percent, respectively, since the start of the nationwide survey.

Consumer outlook was mixed across income groups for the current quarter and the year ahead, the survey showed.

The low- and middle-income groups both registered a weaker outlook for the current quarter while that of the high-income group remained steady.

For the year ahead, the sentiment of the low-income group was more optimistic while the middle- and high-income groups’ view was less sanguine. For the next quarter, however, consumer confidence was lower across all income groups.

The spending outlook index of households on basic goods and services held steady at 30.2 percent for the third quarter indicating that respondents who expect to spend more on goods and services outnumbered those who said otherwise, but the number that said so remained nearly unchanged compared to the previous quarter’s survey.

Across commodity groups, more respondents expected an increase in expenditures on transportation; fuel; water; education, recreation and culture; electricity; clothing and footwear; and personal care and effects while fewer respondents anticipated an increase in expenditures on medical care, food, and restaurant and cafés.

Meanwhile, the spending outlook was broadly steady for house rent and communication.

Respondents considered the current quarter as a favorable time to buy big-ticket items but the number that said so was broadly steady at 28.9 percent.

The outlook on buying conditions was almost unchanged for consumer durables and motor vehicles, but weakened for real estate.

Buying intentions of respondents for the year ahead declined across the three big-ticket items compared to the previous quarter’s survey results.

For the second quarter, the percentage of households with savings slightly increased to 33.2 percent from 32.7 percent a quarter ago.

The numbers of households with savings increased among the low-income group but decreased for both the middle- and high-income groups based on the survey.

Respondents said they save money for emergencies, retirement, health and hospitalization, education, and business capital and investment.

Nearly two-thirds or 65.9 percent of household savers had bank deposit accounts while 47 percent kept their savings at home and 26.4 percent put their money in cooperatives, paluwagan, other credit/loan associations, SSS, and as investments.

The percentage of respondents who reported being capable of savings improved to 39.3 percent un the current quarter from 38.9 percent in the previous quarter.

However, the proportion of those that could set aside 10 percent or more of their monthly gross family income declined to 36.9 percent from 38.9 percent for the first quarter.

Respondents anticipated inflation to slightly increase to 3.4 percent from 3.3 percent a quarter ago which means that consumers expected that the rate of increase in commodity prices will be modest over the next 12 months and that inflation expectations are likely to remain well anchored to the inflation target.

Respondents are also of the view that the peso would appreciate against the US dollar over the next 12 months.Majority of respondents expected interest rates to increase despite the number declining.

Similarly, the unemployment index was lower at 22.6 percent from 31.1 percent in the last quarter’s survey.

Notably, the unemployment index for the second quarter registered the second lowest reading since the start of the survey which could indicate improving labor conditions.

Of the 555 households included in the survey that received OFW remittances for Q2 2016, 97.1 percent used the remittances that they received to purchase food and other household needs.

The proportion of OFW households that said so as well as those that allotted part of their remittances for medical expenses (55.5 percent), purchase of consumer durables (21.6 percent), and purchase of house (11 percent) remained steady but decreased for education (68.3 percent), debt payments (43.6 percent), savings (38.6 percent), investment (4.5 percent), purchase of motor vehicles (7.2 percent) and other miscellaneous expenses (2.3 percent).

The decline in the percentage of households that allotted remittances for savings could be due to their expected increase in expenditures on basic goods and services.

The BSP said the survey was held from April 4 to 16. The respondents were drawn from the Philippine Statistics Authority (PSA) 2003 and 2013 Master Sample List of Households, which is considered a representative sample of households nationwide.

The CES sample households were generated using a stratified multi-stage probability sampling scheme. It has a sample size of 5,961 households, of which 3,081 (51.7 percent) were from the National Capital Region (NCR) and 2,880 (48.3 percent) from areas outside NCR (AONCR).