Consumer spending rebounding in RP, Asia

MANILA, Philippines–Household spending in overseas remittance-rich Philippines as well as around Asia is rebounding in a big way despite the recent global financial turmoil—and the boom appears sustainable, according to British banking giant HSBC.

In its economic research Asian Chartbook dated Dec. 8, HSBC said fragile exports, large excess capacity and the aftermath of back-to-back Tropical Storm “Ondoy” and Supertyphoon “Pepeng” had slackened the pace of recovery in the Philippines.

“However, robust remittances will underpin consumption, offsetting the impact of rising inflation pressures and a weak labor market,” the research said.

On the other hand, the bank said the Philippine government’s fiscal position would likely continue to be under pressure due to a full-blown slump in revenue and rising discretionary spending.

All across Asia, HSBC said households have now become a driver in the region’s economic recovery after lagging the overall expansion in gross domestic product (GDP) for many years.

“After a deep slump in growth and confidence, households have opened their wallets again and are becoming an important driver of economic growth for the region,” HSBC said.

The bank said this had become especially obvious in the dramatic turnaround in car sales across the region, with such purchases rising at double-digit rates in the Philippines, China, India, Korea, Taiwan and Vietnam.

HSBC said China and Vietnam were leading the way in terms of vehicle sales growth, but noted that other markets were showing surprising strength as well, including Taiwan, India, Korea and the Philippines.

“The strength in consumption largely reflects the resilience of the regional labor markets, where unemployment rates have fallen now everywhere and job creation has accelerated strongly. As wages begin to rise again, we expect further good news on consumption to emerge,” it said.

In the past, HSBC said domestic demand, including consumption, was usually closely tied to the performance of exports. But this time around, it said shoppers were returning even before shipments picked up, suggesting that Asia’s rebound could be sustained even if the global trade cycle remains subdued for the time being. –Doris Dumlao, Philippine Daily Inquirer