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Consumer Confidence on the Upswing

06.08.2007

Overall Consumer Outlook

• For the Second Quarter

The overall consumer confidence index for the second quarter of 2007, although still negative, improved by over 7 points to -26.0 percent from -33.3 percent in the first quarter. The decline in the negative index indicated that the number of optimists increased relative to last quarter. The near-term outlook was more favorable compared to the results obtained in the last survey, with improved indices for the third quarter and for next year.

Behind this optimism was consumers’ more upbeat assessment on the country’s economic condition as well as their own family income and financial situations as the respective indices in the second quarter moved up by at least 7 points quarter-on-quarter. Consumers attributed the favorable economic outlook to the strength of the peso, stable prices of goods and more job opportunities. Meanwhile, new business opportunities, the employment of more household members, salary increases, and better proceeds from agricultural crops were some of the reasons cited by respondents for the expected improvement in household finances.

During the quarter, there were more optimists in NCR than in areas outside NCR (AONCR) as the confidence index of the former at -24.5 percent was slightly higher compared to the latter at -26.3 percent.

Consumers in all income levels in AONCR anticipated better conditions in the second quarter as their indices improved quarter–on–quarter. In the case of NCR consumers, indices were moderately lower quarter–on–quarter but considerably higher compared to year–ago levels.

• For the Third Quarter and Next 12 Months

Consumer confidence for the third quarter likewise improved as the index at -6.7 percent increased by 4.4 points from the index recorded during last quarter survey. Confidence indices for both the NCR and AONCR were higher quarter–on–quarter. For NCR, the index at -1.9 percent was the most upbeat since the start of CES in the third quarter of 2004.

Consumers’ outlook for the next 12 months was even more upbeat. Majority of respondents nationwide were optimistic that conditions would be better over the next 12 months as the index moved up to 5.8 percent (from 0.8 percent). The confidence index for NCR at 14.0 percent was the highest ever recorded since the survey started in 2004, while that in AONCR at 4.3 percent was a reversal from the negative index (–1.3 percent) recorded a quarter-ago.

Among the reasons cited behind the favorable outlook include normalization of the political situation, anticipation of improved governance by newly elected officials, expected business upturn, and increase in job opportunities.

Expenditures for Next 3 Months

The proportion of household respondents nationwide that anticipated that their expenditures on basic goods and services would rise in the third quarter slightly declined (index at 33.4 percent from 34.2 percent from the previous survey). The expenditure items expected to have higher increases than in the second quarter were those on education, clothing and footwear, and fuel due largely to school opening-related expenditures and increases in crude oil prices. 

Buying Conditions for the Next 3 Months

Respondents from both the NCR and AONCR indicated improved prospects of buying consumer durables, motor vehicles, and residential properties. Buying condition indices edged up to 49.6 percent in the second quarter from 43.9 percent in the first quarter for the Philippines, 52.9 percent from 46.8 percent for the NCR, and 49.0 percent from 43.4 percent for AONCR.

Among the reasons cited for the favorable buying conditions in the second quarter of 2007 were: 1) increasing affordability of consumer durables due to easy installment terms and availability of surplus and sale items, 2) favorable weather conditions to evaluate real estate properties, and 3) lower interest rates.

Buying Intentions for the Next 12 Months

Despite improved buying conditions in the current quarter, consumers’ buying intentions for the next 12 months were marked with restraint, with the buying intention index for the next 12 months declining by 1.1 points to 19.6 percent. Except for consumer durables, all buying intention indices declined modestly from the levels last quarter, indicating that, consumers’ expenditures on big-ticket items such as motor vehicles and house and lot will be subdued in the next 12 months.

Selected Economic Indicators: Outlook for the Next 12 Months

Consumers nationwide who believed that the peso would strengthen against the US dollar outnumbered those who believed otherwise as the index reverted to a positive number (at 1.1 percent from -11.4 percent). This is also the first time since the start of the CES in the third quarter of 2004 that the exchange rate index in NCR turned positive which implied that majority of respondents were optimistic in the second quarter of 2007 that the peso will continue to strengthen in the next 12 months. Likewise, consumers nationwide expected the interest rate and the inflation rate to decelerate in the next 12 months. The unemployment rate was also expected to drop in the next 12 months.

Expenditures of Overseas Filipino Workers for the First Quarter

Survey results during the second quarter of 2007 showed that, next to food and other household needs (91.8 percent), most OFW households spent the remittances that they received on education at 53.1 percent. More than one in five of these households spent the remittances on medical expenses (24.2 percent) and on debt payments (22.9 percent). OFW households that indicated setting aside part of remittances for savings comprised 15.7 percent of the total OFW households. Meanwhile, about 6.0 percent allotted funds for purchase of assets (purchase of vehicles and house at 3.5 percent and 2.5 percent, respectively) and 4.5 percent for investment in business. The utilization pattern of OFW remittances was similar for both NCR and AONCR households.

About the Survey

The second quarter 2007 CES was conducted during the period 2-30 April 2007 with a sample size of 2,689 households in NCR and 2,562 households in AONCR for a total of 5,251 households nationwide. The households interviewed were drawn from the National Statistics Office’s (NSO) Master Sample List of Households, which is considered a representative sample of households nationwide. The said master sample was generated using a stratified multi-stage probability sampling scheme. The total survey response rate nationwide for the first quarter of 2007 was 97.1 percent. By area, the response rate was 94.9 percent in NCR and 99.3 percent in AONCR.

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