Consumer outlook plunges

MANILA, Philippines – Consumer confidence plunged to its lowest level in the third quarter of the year, and although some improvement was expected in the last months of 2008, sentiments were likely to continue dropping until next year.

The quarterly Consumer Expectations Survey (CES) of the Bangko Sentral ng Pilipinas (BSP) showed the grim outlook of the consuming public on the economy, their finances and family income.

The BSP reported yesterday that, when asked about their outlook for the third and fourth quarters, consumers in 5,472 households nationwide were decidedly bearish, with the Confidence Index falling to -52.8 percent, the lowest level since the survey went national in 2007.

The BSP said the index was down by nine points quarter-on-quarter and by 29.2 points year-on-year.

The negative index indicated that more consumers expected that conditions could worsen in the third quarter.

The BSP said there was some pick-up in sentiments toward the fourth quarter – not surprising since spending normally goes up during the holiday season when people have more money.

However, the BSP said this quarter’s outlook for the year ahead was also less favorable at -23.9 percent relative to the year-ahead outlook in the second quarter when the index was at -20.3 percent.

“This is a quarterly survey so sentiments might change when we ask them again in three months, but for now, this is the consumer confidence level,” said BSP Deputy Governor Diwa Guinigundo. 

According to the CES results, consumers were most pessimistic about their outlook on the country’s economic condition, with the consumer confidence index taking the deepest fall at -81.2 percent, down by 8.2 points quarter-on-quarter and by 45.1 points year-on-year.

As fewer consumers expected improvements in their family income, the BSP said the CI on family income and family financial situation both declined to -25.8 percent and -51.5 percent, respectively.

According to the BSP, the declines in the indices on family financial situation were registered across all income groups, although the survey indicated that lower income groups were significantly less happy than higher income families where the index – while declining – remained firmly in the positive zone.

The BSP said consumers were most concerned about rising prices of fuel and basic commodities, the anticipated increase in the number of unemployed, and reduced household income.

The CES results confirmed that consumers from the high income group remained broadly optimistic about their family income in the third quarter, although the number of optimistic respondents from this group contracted as the family income index declined to 7.3 percent from 13.8 percent in the second quarter.

Meanwhile, the confidence of low- and middle-income households slumped further with the continuing rise in the prices of basic goods and services.

These income groups represented 57.5 percent and 33.6 percent of all respondents.

The BSP said that against the expected increase in prices, consumers anticipated that expenditures on basic goods and services would increase for the quarter ahead as the index remained positive at 56.9 percent.

Households expected an acceleration of expenditures particularly on food, transportation and fuel – items which have recently registered sharp price movements.

According to the BSP, respondents anticipated that the burden of adjustments would be borne by other expenditure items, specifically clothing and footwear and communication – items that may be considered relatively non-essential – as well as education and medical care.

The survey results also indicated that consistent with the dim expectations on family income over the one-year horizon, the percentage of households who intended to buy big-ticket items for the year ahead declined to 6.0 percent from 7.9 percent in the second quarter and 13.6 percent a year ago.

By commodity, buying intentions for consumer durables was slightly higher at 8.3 percent compared to purchase of vehicle (3.7 percent) and house and/or lot (5.9 percent).

Given the expected downturn in the growth of the domestic economy, more consumers anticipated that the peso would depreciate against the dollar in the year ahead.

The BSP said consumers also expected that the unemployment rate and interest rates would continue to rise.

Moreover, consumers expected that prices of basic goods and services would go up.