CONSUMERS remained bullish this quarter, though less so than in the July-September period, while business confidence improved, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.

Consumers’ “current quarter” confidence index (CI) slipped to 1.3% from 4.6% last quarter, with the reading in the National Capital Region going down to 7.7% from 13.2% and that outside NCR similarly dropping to 0.3% from 3.2%, according to results of the fourth-quarter Consumer Expectations Survey which the BSP conducted last Oct. 1-12 among 5,421 households nationwide.

The CI is computed as the percentage of households that answered in the affirmative less the percentage of those that answered when asked on specific indicators for the overall condition of the economy, household finances and household income.

“According to respondents, their less favorable outlook for Q4 2019 was due to… higher prices of commodities, low or no increase in salary/income, increase in household expenses, and high unemployment rate,” the BSP said in a news release summarizing survey results, citing weakened sentiment across all three main indicators and across all income groups.

Consumer expectation for the “next three months” and the “next 12 months” slipped, to 15.7% from 15.8% and to 26.4% from 29.8%, respectively.

“Similar to Q4 2019, the lower CI for Q1 2020 and the next 12 months stemmed from households’ anticipation of higher prices of commodities, no or low increase in salary/income, high unemployment rate and increase in household expenses,” the central bank noted.

“…[F]or Q1 2020, consumer sentiment across component indicators was generally steady compared to Q3 2019 survey results,” it said, adding that “[f]or the next 12 months, respondents’ outlook on economic condition of the country and family financial situation was less favorable, while family income remained broadly steady compared to Q3 2019 survey results.”

The outlook for household spending on basic goods and services steadied at 37.1% for the first three months of 2020, compared to the “next quarter” reading in the third-quarter survey. “This indicates that respondents who expect to spend more on goods and services outnumbered those who said otherwise, but the number that said so remained generally unchanged compared to Q3 2019 survey result for Q4 2019,” the BSP explained.

Households’ spending outlook was mixed across commodity groups:

• steady for food, non-alcoholic and alcoholic beverages and tobacco, fuel, and personal care and effects;

• while more respondents expected an acceleration of expenditures on transportation, education, recreation and culture, clothing and footwear, medical care, communication, restaurant and cafes, and house rent and furnishing;

• and fewer respondents anticipated higher spending on electricity and water.

The percentage of households that considered this quarter as a good time to buy big-ticket items declined to 27.2% from the 28.9% recorded in the third-quarter survey.

The BSP noted that a “less sanguine outlook on buying conditions was evident” for consumer durables, motor vehicles, as well as house and lot, blaming respondents’ “waning” buying intentions to greater priority on food and other basic needs from big-ticket items, high prices of big-ticket items and low or insufficient income.

The percentage of those who intend to buy big-ticket items in the next 12 months similarly decreased across the three big-ticket items.

The latest survey also showed that consumers expect inflation, interest and unemployment rates to increase and exchange rate to depreciate in the the next 12 months.

Business CI improved to 40.2% in the “current quarter” from 37.3% in the third-quarter survey, with the NCR reading edging up to 42.2% from 40.4% and the reading outside the capital going up to 36.8% from 31.9%, according to the fourth-quarter Business Expectations Survey which the BSP conducted last Oct. 3-Nov. 25 among 1,477 firms drawn from a combined list of the 2017 BusinessWorld Top 1000 Corporations in the Philippines and the Securities and Exchange Commission’s (SEC) Top 7,000 Corporations in 2010.

The central bank said survey respondents attributed improved optimism to expectation of higher consumer demand during the holiday and harvest seasons; increase in sales, orders and projects; more favorable macroeconomic conditions such as faster economic growth and lower inflation and unemployment rates; bigger government spending, mainly in infrastructure and (e) business expansion.

The BSP also noted that respondents anticipated positive impact of the country’s hosting of the Nov. 30-Dec.11 2019 Southeast Asian Games in terms of availability of more jobs and increased consumer spending.

At the same time, business confidence for the “next quarter” fell to 40.3% from 56.1%, while the reading for the “next 12 months” improved slightly to 59.6% from 58.6%.

Optimism weakened for “next quarter”, with the CI dropping to 40.3% from 56.1% in the third-quarter survey due to expectations of lower consumer demand after the holiday and harvest seasons; decline in sales and orders; stiffer competition; and other factors like rising prices, concerns about the African Swine Flu outbreak and fishing ban period.

Businesses turned more optimistic about prospects for the next 12 months due to expectations of sound macroeconomic fundamentals such as more stable economic growth and lower inflation and interest rates; increased consumer demand; bigger government spending on infrastructure; development of new product lines/models and marketing and business strategies; business expansion; as well as new projects, clients and customers.

Respondents also expected financial conditions to remain tight, even as they saw easier access to credit.

Survey results also suggested that more firms will continue to hire in the next quarter and the next 12 months, although the number of those who said so was lower than in the preceding quarter’s survey.

Moreover, the percentage of industries that plan to expand “next quarter” slipped to 29.1% from 30.4% in the past quarter’s survey, with manufacturing; electricity, gas and water; as well as agriculture fishery and forestry turning more conservative, while mining and quarrying businesses turned more optimistic.

The reading for expansion plans for the “next 12 months” improved slightly to 38.1% from 37.9% on increases for manufacturing as well as mining and quarrying, while businesses turned more conservative in the electricity, gas and water as well as agriculture, fishery and forestry sectors.

The latest survey also showed that respondents expect the peso to appreciate, interest rate to decline and inflation rate to increase for the current quarter.

While they expected the overall increase in prices of widely used goods to keep within the central bank’s 2-4% target range for 2019 and 2020 they expected inflation to average 2.9% for this quarter, three percent for 2020’s first three months and 3.2 percent for the next 12 months.

They also expect the peso to average P51.5 to the greenback this quarter, P51.7 per dollar in 2020’s first three months and P51.8 to the dollar for the next 12 months.