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Consumer Confidence Slightly Weakens in Q2 2010, but Outlook for the Next Twelve Months Hits Record High Optimism

06.10.2010

Consumer confidence declines slightly in Q2 2010 but hits record high in the next twelve months

Consumer sentiment weakened slightly in Q2 2010, with the confidence index (CI) declining to  -28.7 percent from -27.6 percent in Q1 2010 amid concerns over the impact of the El Niño dry spell on agricultural output and near-term uncertainties in the job market as new graduates enter the labor force. By contrast, with favorable expectations over the fresh mandate to be exercised by newly-elected national and local government officials, consumer confidence over the course of the next 12 months reversed gear and turned more optimistic. In particular, the next 3 months’ CI reached its second highest level since the nationwide survey started in 2007, although the pessimists continued to outnumber the optimists but only by a small margin. The positive outlook for the next quarter mirrored the rebound in consumer confidence in other countries such as the United States, China, Mexico, Hungary, Slovenia, and Czech Republic.

Further evidence of more buoyant consumer confidence was reflected in the all-time-high positive index for the next 12 months which jumped to 10.0 percent from 5.1 percent a quarter ago and -7.6 percent a year ago.

The high- and middle-income groups look forward to more favorable economic conditions while the low-income group expects higher family income

Consumer perceptions were captured across three dimensions: economic condition of the country, family financial situation and family income. In the current quarter, consumer sentiment across income groups showed mixed trends. The perception of the low-income group (comprising the bulk of the respondents) improved in two dimensions—on the economic condition of the country and their own family income—but their outlook on their family financial situation weakened slightly. The sentiment of the middle-income group on their own family income picked up but their views on the economic condition of the country and their family financial situation declined. Meanwhile, the outlook of the high-income group was less optimistic across the three dimensions.

Looking ahead to the next 12 months, consumer sentiment across the three dimensions improved. The outlook on the economic condition of the country registered the most notable improvement, reaching its highest level since the nationwide survey started in 2007. The high-income group had the most upbeat outlook on the country’s economic condition, followed by the middle-income and the low-income groups. They were also the most optimistic about their family financial situation, but the number of respondents who were optimistic declined relative to a quarter ago.

Meanwhile, the low-income group registered the biggest improvement in outlook with respect to their family income for the next twelve months, followed by the middle-income group. Both groups’ optimism on their family income was at their highest level in 9 quarters since Q2 2008, while the sentiment of the high-income group declined but remained buoyant.

Spending outlook on basic goods and services declines slightly in Q3 2010

Fewer households expected that their expenditures on basic goods and services would go up in   Q3 2010. Except for water consumption and transportation, the spending outlook decreased for all other basic commodities. This view is consistent with expectations of lower inflation rates for the year ahead.

Buying conditions remain broadly steady in Q2 2010

Despite the modest weakening of consumer outlook, the percentage of respondents that considered the current quarter as a favorable time to buy big-ticket items remained steady compared to the previous quarter. The slight improvement in the buying conditions for consumer durables and housing was offset by the slight decline in buying conditions for motor vehicles. 

Buying intentions for the next 12 months likewise continue to be broadly steady

The broadly steady outlook of consumers on buying conditions for Q2 2010 was carried over to the next 12 months. This outlook on buying intentions was observed for both NCR and AONCR respondents.

Selected Economic Indicators: Outlook for the next 12 months

Consumers have a more favorable view on the trend of selected economic indicators. With expectations of possible employment abroad and more domestic job opportunities, the employment situation is anticipated to improve in the next 12 months as the number of respondents who expected an increase in the unemployment rate declined relative to the previous quarter’s survey results. Due in part to declining oil prices, respondents expected inflation to edge lower to 9.1 percent (from 10.4 percent) over the course of the next 12 months. With inflation expected to be contained at lower levels, a greater number of consumers anticipated that interest rates would likewise be on a downtrend. Consumers anticipated that the peso would continue to appreciate against the US dollar in the year ahead in line with expectations of continued strong inflows of foreign exchange, particularly from overseas Filipinos’ remittances, business process outsourcing services receipts and merchandise export revenues.

Expenditures of Overseas Filipino Workers in Q2 2010

Most OFW households used remittances in Q2 2010 for food (96.3 percent of the households). Over sixty percent of the households (64.2 percent) used their remittances for education expenses,   51.4 percent for medical expenses and 43.3 percent for debt payments. The percentage of OFW households that utilized remittances to purchase consumer durables and motor vehicles was broadly steady at 27.0 and 7.7 percent, respectively. Those that apportioned part of their remittances for amortization or full payment for houses purchased decreased to 11.9 percent.

Compared to the previous quarter’s survey results, the percentage of households that allocated portions of their remittances to savings went down to 38.0 percent (from 50.4 percent), while those households using remittances for investment increased to 7.2 percent (from 5.8 percent).

About the survey

The Bangko Sentral ng Pilipinas started the Consumer Expectations Survey (CES) in Q3 2004 but the coverage was limited to the National Capital Region. The CES became a nationwide survey beginning Q1 2007. For Q2 2010, the CES was conducted during the period 5-16 April 2010 with a total sample size of 5,706 households, of which 3,104 (54.4 percent) were from the NCR and 2,602 (45.6 percent) from the AONCR. The CES samples 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 nationwide total survey response rate for Q2 2010 was 96.0 percent (from 96.5 percent in the last quarter’s survey).

For inquiries, please contact the Department of Economic Statistics

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