Business sentiment turns bullish in third quarter

MANILA, Philippines – Encouraged by signs of improvement in the US and global financial markets, business sentiment turned bullish in the third quarter of this year.

The latest Business Expectations Survey (BES) conducted by the Bangko Sentral ng Pilipinas (BSP) showed that business sentiment continued to improve in the third quarter as the overall confidence index (CI) reverted to positive territory at 18.4 percent, a sharp increase of 31.1 index points from a year ago. A positive index means there were more optimists than pessimists among survey respondents.

The BSP said this is the first time since the third quarter of 2008 that optimists outnumbered pessimists.

“The favorable sentiment was consistent with the emerging outlook of improving global economic conditions based on readings that suggest stabilization and recovery in key economic indicators,” the BSP said.

The BSP also highlighted the upbeat business confidence outlook for the fourth quarter of 2009 with the CI rising by 17.1 index points to 33.7 percent.

According to the BSP, this upbeat trend in business sentiment sustained the positive development observed in the previous quarter’s survey results.

“The improvement in domestic macroeconomic fundamentals (i.e. declining consumer prices, easing interest rates, rising remittances from overseas Filipinos workers and the relatively stable peso vis-à-vis the dollar) helped lift business sentiment. Moreover, the expected seasonal pickup in consumer demand in the last quarter of the year may have contributed to the optimistic outlook for the fourth quarter of the year,” the BSP said.

The latest BES was conducted between July 1 and Aug. 14. Respondents were 1,389 firms across all sectors of the economy, the BSP said.

Respondents from both the National Capital Region and the Areas Outside the NCR registered more upbeat outlook for the third quarter. However, NCR respondents were more bullish on the economy than their counterparts from the AONCR in third quarter and fourth quarter of this year.

The survey divided the business community into four sectors: Construction (which registered the most favorable business outlook with a CI at 37.3 percent), services sector (20.2 percent), industry (18.8 percent), and wholesale and retail trade sectors (12.8 percent).

The survey also showed that all types of businesses (i.e., importers, exporters and those engaged in dual activities) expected more favorable economic conditions in the fourth quarter of the year.

Respondents were also bullish that their operations would continue to be favorable during the third quarter as indices were higher relative to levels recorded a year ago and during the last quarter.

Despite the improving outlook of firms on their operations, the average capacity utilization during the review period slightly declined to 68.9 percent compared to last quarter’s 69.2 percent. –Ted Torres (The Philippine Star)