CONSUMER SPENDING has yet to return to its pre-pandemic growth track amid sticky inflation and “smaller policy support” for households, according to Moody’s Analytics.

“Goods consumption trends have seen greater variation. In most economies in the region, it never surged above the pre-pandemic trend the way it did in the US,” Moody’s Senior Economist Stefan Angrick and Associate Economist Jeemin Bang said in a report.

“More recent data show (that) goods consumption is slowing in New Zealand, South Korea, the Philippines and Australia; sticky inflation and reduced policy support are weighing on household spending,” it added.

Inflation in the Philippines dropped to its lowest level at 2.4% in 2020 as the coronavirus pandemic dragged down consumer spending, accelerating to 6% last year amid price hikes and global headwinds.

In March, headline inflation accelerated for the second straight month to 3.7% amid rising food costs.

“Weak spending is driven by the persistence of high interest rate that is used to manage inflation due to supply-side constraints,” Oikonomia Advisory & Research, Inc. president and chief economist John Paolo R. Rivera said by Viber.

Last week, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. signaled the possibility of delayed rate cuts due to inflation risks.

The BSP kept its benchmark interest rate at 6.5% for a fourth straight meeting in April. The Monetary Board raised borrowing costs by 450 basis points from May 2022 to October 2023.

“To increase household spending, policies to enhance income-generating capacities of households must be given emphasis such as creating a conducive economy for investments that will create jobs,” Mr. Rivera said.

The government must also address supply-side constraints especially in agriculture to help ease inflation, he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said reduced tariffs on commodities and conditional cash transfer programs for the poor should help increase household spending.

“Goods typically make up a smaller share of private consumption than services, so weaker goods consumption won’t completely derail these economies as long as services consumption stays on course. But weaker goods spending is a headwind at a time when growth is already hard to come by,” according to the report.

The Philippines targets gross domestic product (GDP) of 6-7% target this year. They fell short of official growth expectations at 5.5% in 2023.

Within the region, Taiwan was the only Asia-Pacific country that enjoyed a rise in goods consumption due to the high demand for IT (information technology) goods.

Moody’s also noted that services spending in the Philippines and Thailand have yet to rebound from the pandemic, mainly due to the slow tourism recovery.

“Services spending in the Philippines and Thailand remain far below the pre-pandemic trend, reflecting a high degree of pandemic scarring on both economies,” the report said.

Services consumption is “almost back to normal” among high-income developed countries like South Korea, Taiwan, and Australia, but still lags in New Zealand and Japan.

Moody’s reported that the availability of vaccines, longer social distancing measures helped other countries recover earlier.

Mr. Ricafort said that state spending in tourism-related infrastructure, like airports, seaports, public transportation, and toll roads would bolster recovery in the sector and ensure growth in the services sector. — Beatriz Marie D. Cruz