BSP: Consumers pessimistic on economy for the third quarter

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Metro Manila (CNN Philippines, September 7) — The third quarter appears bleak for consumers and businesses alike.

The Bangko Sentral ng Pilipinas (BSP) released the results of its third quarter Consumer Expectations Survey on Friday.

For the first time in two years, the consumer confidence index (CI) entered negative territory at -7.1 percent for the third quarter of the year, dropping from 3.8 percent in the same period last year.

"After eight quarters of positive consumer reading, the overall confidence index (Cl) reverted to negative territory at -7.1 percent from 3.8 percent for Q2 2018. The negative index indicates that the pessimists outnumbered the optimists for Q32018," the BSP said in a statement.

Respondents noted an increase in commodity prices and household expenses, coupled by low salary/income with no increase. They also cited the unemployment rate. Government figures show that the unemployment rate for July was at 5.4 percent, with youth unemployment at 14.1 percent.

"Respondents also noted concerns on higher educational expenses and higher transportation expenses as reasons behind their gloomy prospects," the BSP added.

The central bank explained three indicators are used to measure the consumer outlook: the country's economic condition, the family's financial situation, and the family income, which all dropped in the third quarter.

"The quarter-on-quarter decline in confidence was observed across these three component indicators of consumer confidence. Notably, the CIs for the country's economic condition and family financial situation reverted to negative territory for the current quarter while family income remained positive but lower from a quarter ago," the BSP said.

For low- and middle-income families, their primary concern was expectations of higher household expenditures vis-a-vis no increase in income. High-income families anticipate peace and order problems and peso depreciation.

The number of households with savings decreased in the third quarter to 32.5 percent from 37.4 percent due to emergencies, health, education, retirement, real estate purchases, and business investments. Around a third of respondents, at 31.7 percent, declared that they have an outstanding loan.

"For the current quarter, debt-to-income ratio of surveyed respondents rose to 43.4 percent, higher than the previous quarter's survey results of 27 percent," the BSP reported.

Overseas Filipino workers (OFWs) have also put less of their remittances into savings for the third quarter, as 94.4 percent of their earnings was used for household needs.

Moving forward, consumers expect inflation and interest rate to increase, and the peso to continue to depreciate.

"The number of respondents with views of higher inflation increased compared to that a quarter ago, reflecting stronger inflationary expectations over the next 12 months," the BSP said, adding that respondents do not expect the government to hit the two to four percent inflation target for 2018.

With expectations of higher prices and low income, consumers are less positive about the coming quarter.

"Respondents cited expectations of high prices of goods, low salary or income, and rise in expenditures as reasons for their less upbeat outlook for the near term and the year ahead," the BSP reported.

Because of the increase of prices and the upcoming holiday season, consumers expect to spend more for the fourth quarter.

Households expect to spend more on fuel, transportation, water, electricity, food, and non-alcoholic and alcoholic beverages. Less consumers plan to buy big-ticket items, though plans to buy motor vehicles and real estate remain steady.

READ: Business sentiment lowest since 2010 — BSP