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Consumer Sentiment Improves in Q1 2008

03.13.2008

Nationwide consumer confidence improved
Consumer confidence nationwide strengthened in Q1 2008 after a downturn in Q4 2007 as the number of respondents with positive outlook on the economy and on their financial condition increased while those with a negative outlook decreased. The overall consumer confidence index (CI), while remaining negative, improved to -27.1 percent, or by 6.5 index points quarter-on-quarter and by 6.2 index points year-on-year.

Consumers nationwide were also bullish about their expectations for the next quarter and the next 12 months.  The index in Q2 2008 reversed to positive 1.4 percent from the negative levels in the previous quarter and last year. Respondents were even more bullish for the next 12 months as the index climbed to 13.4 percent from 5.5 percent in the previous survey and from 0.8 in Q1 2007 survey.

The high income group remained the most confident among all income groups. The low income group (with monthly income less than P10,000) has been recording consistent improvements in the outlook for Q1 2008 and onto Q1 2009 on the economy and their own financial conditions.

The consumer confidence in Q1 2008 and in the near term (next quarter and next 12 months) was borne out of expectations of better business conditions and additional income for the family due to the increase in the number of employed household members locally and overseas, reflecting the latest employment data for Q4 2007, with the employment rate rising at 93.7 percent from 92.2 percent in Q3 2007 and 92.7 percent a year ago. Meanwhile, consumers cited the increase in the prices of goods as their major concern which would affect negatively their economic and financial conditions.

NCR consumers more optimistic than those in AONCR
The respondents from the National Capital Region (NCR) were more optimistic than their counterparts from the areas outside NCR (AONCR) as the indices on current and future outlook of consumers in NCR were higher compared to those of AONCR. This can be attributed to the higher proportion of respondents belonging to the middle and high income groups in NCR who tend to be more optimistic than their low income counterparts.

Expenditures for next 3 months to rise
More households nationwide expected that their average expenditures on basic goods and services would go up in Q2 2008 but the number of those who indicated that their expenditures would go up declined relative to the previous quarter’s survey.

As in the past survey results, respondents nationwide indicated that their expenditures in Q2 2008 would rise, particularly on food, electricity, fuel, education, and personal care and effects.

Buying conditions for the next 3 months favorable
About 52 percent of the respondents indicated that buying conditions for Q1 2008 would be favorable. This ratio is higher compared to 46.8 percent a quarter-ago and 43.9 percent a year-ago. Over 57 percent of these consumers considered it a fair or good time to buy consumer durables due to cheaper prices of durable equipment, including computers and similar items. Low interest rates on housing loans made the current environment conducive for buying a house and lot according to 56.3 percent of the consumers. Buying conditions for motor vehicles also improved as the number of consumers who considered it a good or fair time to buy motor vehicles increased from 37.9 percent in Q4 2007 to 42.1 percent in Q1 2008 due to the increasing number of traders offering easy installment terms.

Consumer buying intentions for the next 12 months sluggish
Despite the favorable assessment of the buying conditions for Q1 2008, consumers were not in a rush to buy big-ticket items (consumer durables, motor vehicles, and house and lot) in the next 12 months. On average, the ratio of consumers who expressed the intention to buy in Q1 2008 was slightly lower at 19.0 percent from 20.3 percent in Q4 2007 and from 20.7 percent in Q1 2007.

Selected Economic Indicators: Outlook for the next 12 months
More consumers nationwide believed that the peso will continue to strengthen against the US dollar over the next 12 months as the index increased sharply to 22.2 percent from 3.4 percent in Q4 2007. Respondents, in general, expected a rise in unemployment rate and interest rate, although the number with positive response was lower compared to that in the previous quarter. Similarly, prices of basic goods and services were anticipated to increase although the number of respondents who expected that prices will go up decreased relative to those in the previous quarter and last year.

Expenditures of Overseas Filipino Workers for Q1 2008
As in the previous survey results, most OFW households spent their remittances primarily on food and other household needs, education, medical expenses, debt payments, and savings. On average, the number of households who indicated that they allot part of their remittances for various types of investments (i.e., investments in education and health, savings, investments and purchase of house) was higher by 1.6 percentage points than those in Q4 2007 survey (from 23.0 percent to 24.6 percent).

About the survey
The Q1 2008 CES was conducted during the period 15 January - 14 February 2008 with a sample size of 2,522 households (49.6 percent) in NCR and 2,562 households (50.4 percent) in AONCR for a total of 5,084 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 total survey response rate nationwide for Q1 2008 was 97.6 percent.

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