Consumer confidence takes steep dive in second quarter

MANILA, Philippines – Consumer confidence took a major beating in the second quarter of this year as private households saw dimming prospects for the country and for their own families over the next six months.

The latest Consumer Expectations Survey (CES) conducted by the Bangko Sentral ng PIlipinas (BSP) showed worsening consumer confidence, largely explaining the decline in consumer spending in the first quarter of this year.

According to the BSP’s Department of Economic Statistics (DES), consumers attributed their worsening outlook on the increasingly problematic labor market and the decline in family income as a result of the global economic recession.

DES director Rosabel Guerrero told reporters that consumers were largely grim about their outlook for this quarter, with the confidence index dropping deeper in the negative zone at -34.2 percent.  In the first quarter CES, consumer confidence index was at -25.7 percent.

For the next quarter, sentiments were a little more upbeat but still firmly negative at -13.2 percent, falling from the -6.2 percent confidence level in the first quarter survey.  For the year ahead, the index dropped to -7.6 percent compared with -2.3 percent in the previous survey.

Guerrero said consumers were most pessimistic about their outlook for the economy, with the confidence index dropping from -44.6 percent in the previous quarter to -56.8 percent in the second quarter.

Consumer outlook on their family financial situation also worsened from -22.6 percent in the previous quarter to -31.6 percent while the confidence index on family income dropped from -9.8 percent to -14.2 percent.

Guerrero said consumers are a little more upbeat about their outlook on the third quarter of the year and the next 12 months but sentiments are still broadly negative across all income groups and concerning the same three areas.

The survey was conducted during the first two weeks of April, some weeks before the government officially released the first quarter economic performance report that showed the gross domestic product (GDP) falling to a 0.4-percent growth rate.

BSP Deputy Governor Diwa Guinigundo said consumer outlook was largely driven by inputs from the media as well as the sentiments expressed by employers and businesses.

But Guinigundo noted that while the outlook for this quarter, the third quarter and the next 12 months were all more negative than the first quarter survey, the buying intentions of consumers were still positive.

“There seems to be a disconnect between consumer expectations which are negative and their intention to spend, which is positive,” Guinigundo said.

According to Guinigundo, this was explained by the increase in the number of households that receive remittances from family members working abroad. Even if their outlook was negative, he said they still had the capacity to spend.

The CES results indicated that more households nationwide expected their expenditures to go up in the third quarterly, primarily on basic goods and services.

But the survey result showed that consumers expect their expenditures to go up because they are expecting prices to continue rising in the next quarter.

In terms of buying intentions, on the other hand, the CES showed that sentiments worsened and only 15.8 percent (down from 17.5 percent) of consumers surveyed considered the second quarter to be a good time to buy big-ticket items such as consumer durables, motor vehicles and housing.

But the decline in the outlook on buying conditions, according to the survey, did not affect the buying intentions of households for these big-ticket items, with the index steady at 7.5 percent, quarter-on-quarter.

The CES was conducted in the first two weeks of April covering over 5900 households nationwide across all income groups. Low income households with monthly earnings below P10,000 accounted for 58.4 percent while 49.7 percent were households with earnings between P10,000 to P29,000. The remaining nine percent were households making over P30,000 a month. — Des Ferriols, Philippine Star