Consumers, business confidence improve in 2019 first quarter

MANILA, Philippines — Filipino consumers and local businesses turned more optimistic in the first quarter due to easing inflation, as well as the onset of the election period, which is expected to boost economic activities and spending, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Department of Economic Statistics director Redentor Paolo Alegre Jr. said both consumer and business sentiment turned more upbeat in the first quarter, based on the BSP’s Business Expectations Survey and Consumer Expectations Survey.

Alegre said the overall business confidence index rose to 35.2 percent in the first quarter compared to 27.2 percent in the previous quarter.

Business respondents of the survey attributed their upbeat outlook to the expected increase in business activities during the start of the election campaign, higher spending in infrastructure under the government’s massive infrastructure program, introduction of new and enhanced business strategies and processes, and expansion of businesses and new product lines.

Alegre said firms also anticipate an increase in orders and consumer purchases due to the downward trend in inflation.

“They were also optimistic that their business operations would benefit from the favorable macroeconomic conditions in the country, particularly lower inflation and interest rates,” he said.

Inflation last February slowed to an 11-month low of 3.8 percent, easing within the BSP’s target of two to four percent. This brought average inflation in the first two months of the year to 4.1 percent.

Earlier, the BSP lowered its inflation forecast for 2019 to 3.1 percent from the previous assumption of 3.2 percent.

Given easing price pressures, central bank Governor Benjamin Diokno earlier said there is room for the BSP to ease monetary policy.

Alegre also said businesses also turned more bullish for the second quarter of 2019, as the confidence index rose to 52 percent from 29.4 percent in the previous quarter. This is the highest index recorded since the fourth quarter of 2016.

“Business optimism was heightened on the back of broadly the same factors that were behind the buoyant sentiment for the first quarter of 2019,” he said.

In particular, Alegre said respondents turned more bullish due to the anticipated increase in demand during summer, election-related spending, and more construction activities during the dry season.

Alegre said the consumer expectation index in the first quarter improved to -0.5 percent from -22.5 percent in the first quarter 2018. This means the number of households that have become optimistic increased, but remained relatively lower as compared to pessimists.

The BSP official said this is also the largest quarter-on-quarter increase in the index since the nationwide survey started in the first quarter of 2007.

Consumer outlook in the next three months also reverted to the positive territory at 10.7 percent from -0.8 percent in the previous quarter.