We released today the results of the survey on business expectations for the first semester of 2000. The survey of business corporations based in Metro Manila was conducted during the second semester of 1999. The Assist-Foundation of the Philippine Statistical Association (PSA) was hired for the data-collection and pre-processing of the survey responses.
Survey results point to sustained positive outlook
Results of the survey showed that some 55.2 percent of 259 responding corporations expect improved business conditions for the first semester of 2000, while only 8.1 percent foresee business to deteriorate during the period. The rest of the respondents either predict no change in business outlook (19.7 percent) or have no response (17.0 percent).
Business expectation for selected business variables
Overall, business expectations are generally optimistic as indicated in the direction of the indices for selected business variables. Specifically, net sales are predicted to improve at a faster rate, with net income moving in the same manner even as cost of production/sales and selling & general administrative expenses are projected to increase significantly. Capital expenditures are also expected to increase by 38.1 percentage points. On the downside, average selling price is expected to increase by 5.4 percentage points while the level of employment is expected to decline by 0.3 percentage point in the first semester of 2000.
Around 35.5 percent of respondents have indicated expansion plans for the first semester of 2000, while 51.4 percent have no plans to expand production capacity. This is consistent with responses in overall capacity utilization.
Respondents from the financing, insurance & business services sector held the most optimistic business expectations, followed by the manufacturing sector as food production activity continued to pick up.
Outlook on other macroeconomic indicators
Even as they were broadly optimistic in their overall outlook and despite the prevailing broad stability in domestic interest rates, some 44.4 percent of the respondents expect higher interest rates in the first semester of 2000 while 30.5 percent expect the rates to remain the same. Meanwhile, on the exchange rate, 37.8 percent of the respondents expect the peso to depreciate in the first semester of 2000 while 35.5 percent predict the rates to remain steady. On inflation, 32.4 percent of respondents expect prices of goods and services to remain the same while 37.1 percent foresee goods and services to become more costly.
Leading indicators for 2000 support the bullish sentiment
The positive outlook of the respondents is validated by leading indicators of economic performance for the first semester of 2000 which indicate marked improvement over the comparative year-ago levels. Actual data on lending activity to the financing, insurance and business services sector as of February 2000 showed a growth of 8.2 percent from last year’s comparative level. On the other hand, more active lending activity in manufacturing is consistent with the actual data on manufacturing production, which showed strong growth in terms of value, volume and net sales in February. Passenger car sales for the first two months of the year likewise grew by 28.9 per cent compared with that of last year’s level while MERALCO power sales posted a 0.6 percent increment for the same period.
We are encouraged by this trend in business expectations as they point to more robust business activity for the rest of the first half of 2000. We therefore expect not only briskier economic activity but also higher credit growth which can help bring this about.