BSP on Gloomy Consumers

Filipino consumers are less pessimistic about economic recovery in the first two quarters, although optimists continued to be outnumbered by pessimists, resulting in a negative consumer confidence index this quarter and the next, the central bank said on Thursday.

Based on the consumer survey conducted last February 10-21, the confidence index for this quarter improved to -27.6 percent from -36 percent in the last quarter of last year. Meanwhile, the index for the next quarter stood at -4.8 percent, better than the -10.5 percent result from the central bank’s October 1-27, 2009 survey.

"This suggested that consumers were more optimistic that economic recovery is gaining more momentum and that the rebound could result in improved household finances. However, optimistic respondents continued to be outnumbered by the pessimists as the confidence index remained in the negative territory," the Bangko Sentral ng Pilipinas (BSP) claimed.

The "rise" in consumer sentiment, it added, was in line with trends observed in other countries such as Canada, Japan, Britain and Australia, as the global economy emerges from the deepest contraction in post-war economic history.

The outlook for the next 12 months was more upbeat as the confidence index turned positive (5.1 percent) after being in negative territory since the second quarter of 2008. "Consumers anticipate favorable domestic economic conditions with the completion of the national elections," the BSP said.

The February survey had a total sample size of 5,496 households, 54.5 percent or 2,999 of which were from the National Capital Region. The balance came from areas outside the region.

Indicators
The survey found that improved consumer confidence was observed for all three indicators ― the local economy, financial situation of the family, and family income.

"More consumers expected that the economic condition of the country would be better and that this would bring about stable employment conditions, improved household finances and higher family savings. The same trend was seen with regard to the outlook for the next quarter," the central bank said.

Consumers were even more bullish about the next 12 months. For the first time since the start of the nationwide survey in the first quarter of 2007, optimists outnumbered pessimists, with the confidence index reverting to positive territory at 1.1 percent from -16.1 percent in the previous quarter.

The survey found the most notable outlook improvement for the local economy. Compared with the previous quarter, respondents from all income groups anticipated a better economy and improved financial condition for their families this quarter.

"Those belonging to the high-income group had the most favorable view about their family income and family financial situation. Meanwhile, the middle-income group registered the highest number of respondents that turned optimistic about the economic condition of the country [for the first quarter this year], the BSP said. The buoyant outlook across all income groups was carried to the next quarter and year ahead.

Household spending
Meanwhile, more households expected higher spending on basic goods and services in the second quarter partly due to increasing prices and improved household income.

Respondents nationwide expected to increase spending in the second quarter on food, electricity, fuel, transportation, education and personal care and effects, the central bank said.

"Consistent with the more optimistic consumer sentiment, the percentage of respondents that considered the current quarter as a favorable time to buy big-ticket items increased compared [with] the previous quarter’s results," it added.

Respondents traced the improved buying conditions for big-ticket items this quarter to more affordable consumer durables and the improving climate to invest in house and lot on account of the prevailing low interest rate on housing loans and the expected appreciation of real estate properties.

Next 12 months
But while the buying outlook for the next quarter was favorable, buying intentions for the next 12 months was relatively less bullish. The number of respondents intending to buy big-ticket items in the year ahead was broadly the same as in the previous quarter.

Meanwhile, the central bank survey found that consumers had a more favorable view on the job situation in the next 12 months, with fewer respondents expecting the jobless rate to worsen.

On the other hand, more consumers expected prices to go up in the next 12 months due to an expected shortfall in food supply as a result of an El Niño-induced drought and impending power rate increases.

More consumers also anticipated higher interest rates due to rising consumer prices and the peso’s fall against the dollar in the year ahead.

The BSP further noted that of the 534 households supported by relatives working abroad and that received remittances in the first quarter, 97 percent spent part of the money on food and other household needs; 69.5 percent spent it on education; 56.7 percent on medical expenses; and 48.5 percent to pay debt.

The percentage of these households that used remittances to buy consumer durables and motor vehicles was broadly steady at 30 percent and 6.6 percent, respectively. Those that spent part of their remittances to amortize or fully pay for houses went up to 15 percent, the central bank said.

Meanwhile, households that set aside portions of their remittances to savings, which have been steadily increasing since the second quarter of last year, rose further to 50.4 percent, while those that invested the remittances slid to 5.8 percent

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