Business, consumer confidence continues to weaken for the 4th Quarter - BSP

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Metro Manila (CNN Philippines, December 6) — Confidence in the Philippine economy from businesses and consumers alike continue to decline.

The Bangko Sentral ng Pilipinas released its 4th Quarter Business Expectations and Consumer Expectations surveys Thursday, with bleak outlooks from both perspectives.

On the business side, the overall confidence index continued to decline to 27.2 percent from last quarter's 30.1 percent. This is the lowest level since the first quarter of 2010.

"This means that the number of optimists declined, but continued to be greater than the number of pessimists during the quarter," the BSP explained in a statement.

The usual rise in demand during Christmas season was not enough to lift the spirits of businesses for the current quarter due to the following factors: high inflation that affects the price of raw materials, high global oil prices, the weak peso, high interest rates, decrease in sales and orders, and lack of raw materials.

Inflation started tapering off in October, staying at 6.7 percent, and easing into 6.0 percent in November. The interest rate is currently at 4.75 percent as the BSP continues to monitor the risk of higher prices.

Exporters had a bleaker outlook for the current quarter due to high overhead costs and a slack in demand for electronics, home furniture and sugar-sweetened prices. The BSP noted that the lack of demand for sugar-sweetened products was partly due to the higher sugar excise taxes from the recent round of tax reforms.

On the other hand, importers anticipate the effect of the Christmas season, which could lead to higher consumer demand and inflows of remittances from overseas Filipino workers.

Firms overall have a weaker outlook on their business operations for the current quarter and the next. Fewer businesses are also planning to expand for the current quarter, at 36 percent, as they expect tighter financial conditions.

The employment outlook index for the next quarter is at 21.8 percent, lower than last quarter's 26.3 percent.

"This suggests that more firms will continue to hire new employees than those who said otherwise, although the number of new hires could decrease compared to the previous quarter's survey. Employment prospects were expected to moderate across sectors," the BSP said.

Pessimistic consumer outlook

While confidence from the business sector remained afloat, consumer confidence sank further into negative territory.

The consumer confidence index for the fourth quarter is at -22.5 percent, 15.4 points lower than the -7.1 percent logged in the previous quarter. This is the lowest registered reading since the fourth quarter of 2015, and the largest drop since the first quarter of 2007.

"The negative index indicates that pessimists outnumbered the optimists for Q4 2018," the BSP said.

The BSP said that this bearish outlook was due to high commodity prices, increase in household expenses, low salary/income, no increase in income, recent natural calamities and an upsurge in unemployment.

This pessimistic sentiment was felt by all income groups for the current quarter.

Subsequently, consumers also have a lower spending outlook for the first quarter of the new year, at 42.3 percent compared to the 45.7 percent logged from the last survey.

"This suggests that while more respondents continue to expect higher spending on basic goods and services, the number that said so decreased compared to a quarter ago, indicating that growth in consumer spending could slow down in the near term," the BSP explained.

Consumers also expect higher prices of food, non-alcoholic and alcoholic beverage, and clothing as well as increased rent, utility fees, and communication bills at the start of the new year, BSP added.

Both the business and consumer sectors anticipate higher inflation, according to the BSP survey.