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Consumer Confidence Continues to Rise

09.07.2007

Nationwide Consumer Outlook

The nationwide consumer confidence index (CI) for the third quarter of 2007 sustained its upward trend to -23.6 percent from -26.0 percent in the second quarter. Although the index is still negative, the trend indicates a rising number of optimistic consumers compared to the last quarter’s level. Survey results also showed that more households anticipate better economic and family financial conditions in the fourth quarter as the index turned positive at 4.1 percent. Likewise, the confidence index for the next 12 months increased to 7.9 percent from 5.8 percent in the previous quarter survey.

The more upbeat consumer outlook for the current quarter was buoyed up by favorable economic conditions, higher family incomes and better family financial positions.  In particular, the outlook on these factors for the third quarter improved relative to the quarter-ago level by 4.3 points, 2.5 points, and 0.4 points, respectively, despite remaining in the negative territory. Consumers attributed the favorable economic outlook to the strength of the peso, stable prices of goods and more job opportunities.  The reasons cited by respondents for the expected improvement in household finances included employment of more household members, salary increases, an expected business upturn, and higher savings.

It is noteworthy that the improvement in overall outlook was felt most keenly by low-income consumers (with monthly income of less than P10,000) who anticipated better conditions during the third quarter. Their outlook on the country’s economic conditions and own family income increased quarter-on-quarter by 6.6 points and 3.6 points, respectively. Meanwhile, the same outlook indices of consumers from the higher-income groups slightly weakened or were broadly unchanged.

NCR and AONCR Consumer Outlook

The third-quarter CI for the National Capital Region (NCR) improved relative to the outlook in the previous quarter. Similarly, the overall CI for Areas Outside the National Capital Region (AONCR) showed a sustained improvement. For the next quarter, confidence indices for the NCR and AONCR were higher compared to the results in the previous survey. For the first time since the CES was conducted in the third quarter of 2004, the next quarter index for NCR turned positive at 2.6 percent which indicated that majority of the consumers were optimistic about their outlook for the next quarter. The outlook of consumers from AONCR was also markedly more optimistic as the index gained 11.8 points from the previous survey results to surpass the NCR index at 4.3 percent.

Consumers in NCR and AONCR were bullish for the next 12 months. All outlook indices in NCR by component and income groups turned more favorable. For the first time in the past 10 quarters, even those in the low-income group were optimistic that the country’s economic condition and the family financial conditions will be better in the next 12 months.  The reasons cited for the favorable outlook in the next 3 and 12 months were the expected release of end-of-year bonuses, the increase in job opportunities, lower debt payments, anticipation of improved governance by newly elected officials, and an expected business upturn.

Expenditures for Next 3 Months

Consumers nationwide anticipated that their expenditures on basic goods and services in the fourth quarter would rise (with an index of 35.1 percent compared to 33.4 percent in the second quarter) in preparation for the holiday season. The expenditure items with higher confidence indices were those on food, clothing and footwear, electricity, and hotel and restaurants.

Buying Conditions for the Next 3 Months

The majority of respondents indicated that the prospects for buying consumer durables, motor vehicles, and residential properties were appreciably better in the third quarter of 2007. Buying condition indices exceeded the 50 percent mark at 53.6 percent nationwide, 56.4 percent for the NCR, and 53.2 percent for AONCR.

Buying Intentions for the Next 12 Months

The nationwide buying intentions index for the next 12 months improved by 1.8 points to 21.4 percent (from 19.6 percent in the last quarter’s survey). Increases were noted in buying intention indices for all consumer items. Indices in the NCR and AONCR showed the same broad trends as the nationwide trend.

Selected Economic Indicators: Outlook for the Next 12 Months

The number of consumers nationwide who believed that the peso would strengthen against the US dollar continued to rise as the index moved upward sharply to 19.4 percent from only 1.1 percent in the second quarter survey. Meanwhile, declines were observed in the indices for the unemployment rate, the interest rate, and the changes in prices, indicating that an increasing number of consumers expected that unemployment, interest rates, and prices will go down in the next 12 months.

Expenditures of Overseas Filipino Workers for the Third Quarter

Over 90 percent of OFW households spent the remittances they received primarily on food and other household needs during the third quarter. More than 50 percent of these households (53.9 percent) spent their remittances on education, about one in every three spent it on debt payments, and one in every four spent on medical expenses. Meanwhile, there was a quarter-on-quarter increase in the number of OFW households that indicated setting aside part of their remittances for savings (from 15.7 percent to 19.8 percent).

About the Survey

The Q3 2007 CES was conducted during the period 2-27 July 2007 with a sample size of 5,093 households, broken down into 2,558 households (50.2 percent) in NCR and 2,535 households (49.8 percent) in AONCR. 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.

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