Consumer confidence continuing to improve

CONSUMER SENTIMENT continues to improve, the Bangko Sentral ng Pilipinas (BSP) yesterday claimed, with a quarterly confidence index (CI) at a four-year high for the last three months of 2010.

While still in negative territory at -8.5% — meaning pessimists continue to outnumber optimists — the October-December result was an improvement from the third quarter’s -14%. It was also the highest since the quarterly survey was started in 2007, the central bank said.

The rise “was supported by better-than-expected GDP (gross domestic product) growth for the first three quarters of the year at 7.5%, which exceeds the full-year government forecast of 5-6%,” the BSP said in a statement.

“However, the confidence index for Q4 2010 stayed in the negative territory as the pessimists outnumbered the optimists, especially those in the low-income group who attributed their unfavorable sentiment to lack of employment and insufficient income,” it added.

Sentiment for the next three months and the year ahead, meanwhile, dipped slightly but stayed positive. The next-quarter CI fell to 11.9% from 15.3% three months earlier, while that for the next 12 months dipped to 25.9% from 33.4%.

These, the BSP said, suggest that consumers expect “sustained although slower economic growth in 2011.”

“Their expectations could be due to seasonally lower consumer demand in the first quarter of the year and the strong headwinds coming from the weaknesses of the European and American economies,” it added.

Optimism regarding the country’s economic condition, family income and family finances, meanwhile, are at their highest levels for the current quarter, the central bank said. However, near-term and year-ahead outlooks tracked overall sentiment by dipping yet staying positive, it added.

Across income groups, sentiments were again at “their highest levels” for the fourth quarter. The figures stayed positive for all income brackets regarding future expectations, and high-income respondents were the most optimistic.

Consumers expect to spend more for basic goods and services in the first quarter of 2011, the BSP said, an indication of inflationary pressures.

For the last three months of the year, slightly fewer consumers saw the period as a favorable time to buy big-ticket items due “largely to the decline in buying conditions for housing” nationwide.

Buying intentions for the year ahead improved with respect for consumer durables and cars but sentiment regarding housing remained pessimistic.

The peso, meanwhile, is expected to continue appreciating in the year ahead, an outlook the BSP said was in line with expectations of still strong foreign exchange inflows.

Respondents expect inflation to hit 7.6% over the next 12 months, from 5.7% in the last survey, which the BSP attributed to an “expected acceleration of fuel prices, which they expect would pull up the prices of basic goods in the next 12 months.”

More consumers also expect unemployment to rise, “consistent with their expectation of a possible slowdown of the economy in the year ahead.”

The survey also showed that 96.7% of overseas Filipino worker (OFW) households used the bulk of remittances for food while 72.6% spent for education, 61.1% spent for medical payments and 49.8% repaid debt.

More OFW families directed remittances towards savings — 43.7% from 43% three months earlier and just 7.2% in 2007 — and fewer used the money to purchase consumer durables, houses and lots, and motor vehicles compared to the previous quarter’s result.

For the latest survey, conducted last Oct. 1-15, the BSP polled 5,833 households nationwide, of which a little over half, or 3,004, were from Metro Manila. A 96.7% response rate was recorded for this round, it said. –Businessworld