Relaxing quarantine restrictions and the projected high consumer demand during the Christmas season are fueling business optimism for the rest of 2020 while consumers’ pessimism for next year gets diminished.
Several Bangko Sentral ng Pilipinas (BSP) surveys indicated that businesses and consumers are starting to be more confident in the final 3 months, going into the first quarter of 2021. The confidence levels though remain below the pre-pandemic outlook.
For 2020’s quarter, businesses were the last to exhibit a return of confidence. Overall business confidence index jumped back to positive 10.6% from -5.3% in the previous 3 months. A positive reading meant majority of the 1,513 corporations surveyed portrayed optimism toward end-2020.
Behind companies were consumers where the index improved to -47.9% for fourth quarter against a historic low of -54.5% in previous 3 months. The BSP survey involved 5,437 households.
Results of both quarterly polls were less gloomy and reflected what economic managers have pointed out as a “crisis in confidence” after months of lockdowns that prevent the economy’s return to normalcy.
The survey projects the slow rebound in confidence to persist into the near future. Majority of consumers and businesses are looking positive into the first quarter of 2021 with indices at 4.3% and 37.4%, respectively.
Over the next 12 months, the metric measuring businesses’ outlook jumped to 57.7%, while that for consumers slightly eased to 23.6%, BSP surveys showed.
This will be good for the government in convincing consumers to spend more and businesses to reopen operations. For the fourth quarter, consumers are expecting “additional and high income” plus “more jobs and permanent employment” to bring them through the yearend.
Also, low-income earners and the middle class are less pessimistic, because of government cash assistance for poor families and “availability of more jobs.” On the flip side, sentiment worsened for high-income earners this quarter.
Overall, with less pessimistic consumers, businesses are looking forward to “increase in sales of volumes and orders” brought by “uptick in demand during the holiday season,” the central bank said.
But after the holidays, the positive outlook may not be enough to increase consumer spending in the longer run. A subindex measuring household spending was unchanged at 26.4% for the first quarter of next year, the lowest reading on record.
Businesses were more optimistic, with expansion and hiring plans returning to positive for the first quarter of 2021 and over the next 12 months, even as firms are expecting difficulty in securing credit to fund their operations.
Going into 2021, easing lockdowns or even “an end in the COVID-19 pandemic” with vaccine rollout are proving to be the biggest catalyst of optimism among all respondents.