Consumer confidence improves in Q3 2011
Consumer sentiment edged higher in Q3 2011 as the overall confidence index (CI) improved to -18.7 percent from -24.1 in Q2 2011. This is the first quarter-on-quarter gain in sentiment since Q4 2010. The higher (but still negative) CI in Q3 2011 means that the number of households with an optimistic outlook increased but they continued to be outnumbered by those who think otherwise. Respondents cited the following factors for their improved sentiments: expectations of more jobs, higher family income, good business, and the implementation of government policies such as the Pantawid Pamilyang Pilipino Program. Their responses suggested that expansion in the domestic labor market, growth in local industries and higher fiscal spending could be expected to boost domestic demand for the current quarter. Their sentiments however, did not reflect the possible impact of the US credit rating downgrade and the spillover effects of sovereign debt crisis issues in Europe, since the survey was conducted from 1-14 July 2011. 1
Consumers' perceptions about the economy likewise improve while their outlook on family finances and income remain steady in Q3 2011
For Q3 2011, the more favorable outlook of consumers on the country's economy pulled up overall consumer confidence. Respondents cited brighter job prospects, good governance and stable prices for their improved outlook on the economic condition of the country. Meanwhile, consumer sentiment regarding family finances and income remained almost unchanged from those of the previous quarter.
The high income group is most optimistic in Q3 2011
The high-income group registered the biggest improvement in consumer confidence across all three indicators, followed by the middle-income group. The low-income group's sentiment on the country's economic condition also strengthened but their outlook on family finances weakened in Q3 2011 as majority of them cited low income and higher cost of goods and services as the main reasons for their pessimism. For the next quarter and the year ahead, consumer sentiment turned more favorable across all three indicators in all income groups.
Spending outlook on basic goods and services declines in Q4 2011
Fewer households expected their expenditures on goods and services to go up in Q4 2011 relative to the last quarter's survey. The spending outlook decreased for all basic commodities, primarily on transportation and education. This view stemmed from the decline in inflation expectations of survey respondents.
Buying conditions turn more favorable in NCR but less favorable in AONCR
Respondents from both NCR and AONCR considered the current quarter as a favorable time to buy big-ticket items (i.e., house and lot, consumer durables, and motor vehicles). However, consistent with the more optimistic consumer outlook in NCR compared to AONCR, more respondents in the NCR perceived an improvement in buying conditions for all three big-ticket items while a lesser number of AONCR respondents expressed the same view compared to the previous quarter's survey.
Buying intentions in the year ahead increase in NCR but decline in AONCR
Following the more favorable outlook on buying conditions, buying intentions in the year ahead by NCR respondents increased for all three big-ticket items, led by consumer durables. In AONCR, fewer respondents indicated a better outlook on buying intentions, particularly on the purchase of consumer durables and house and lot.
Selected Economic Indicators: Outlook for the next 12 months
Consumers had a more favorable view on the employment situation in the next 12 months as fewer respondents expected an increase in the unemployment rate compared to the previous quarter's survey. Likewise, respondents expected inflation to decline over the next 12 months to 8.5 percent from 10.4 percent in the Q2 2011 survey, reflecting their expectations of more stable prices for the next quarter and the year ahead. The latter expectation was validated by the recent reading on inflation, which showed a decline in inflation rate at 4.7 percent in August 2011 from 5.1 percent in July 2011. Fewer respondents expected a peso depreciation compared to the previous quarter while majority of respondents continued to expect interest rates to increase.
Expenditures of Overseas Filipino Workers in Q3 2011
Of the 651 households that received OFW remittances in Q3 2011, 96.7 percent used remittances for food. More than two-thirds of the households (68.7 percent) surveyed allocated their remittances for education, 55.7 percent for medical payments and 45.6 percent for debt payments. The percentage of OFW households that utilized their remittances for savings declined to 35.5 percent (from 44.0 percent in Q2 2011 and from 43.0 percent in Q3 2010). Likewise, the percentage that apportioned part of their remittances to purchase consumer durables, houses and lots, and motor vehicles dropped compared to the previous quarter's results. Meanwhile, those that apportioned part of their remittances for investment increased to 9.1 percent (from 6.8 percent in Q2 2011 and highest since Q1 2007).
About the survey
The Bangko Sentral ng Pilipinas expanded the Consumer Expectations Survey (CES) into a nationwide survey beginning Q1 2007. Earlier, the survey was conducted only in the NCR (survey started in Q3 2004). 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. For Q3 2011, the CES was conducted during the period 1-14 July 2011 with a total sample size of 5,658 households, of which 3,001 (53.0 percent) were from the NCR and 2,657 (47.0 percent) from the AONCR. The nationwide total survey response rate for Q3 2011 was 97.4 percent (from 96.8 percent in the last quarter's survey).
The overall consumer confidence index is the average confidence index (CI) across 3 dimensions, namely, macroeconomic conditions-general economic condition of the country; family financial situation-status of family finances such as income, savings, outstanding debts, investments and assets; and family income -receipts from all sources received by all family members as participants in any economic activity or as recipients of transfers, pensions and grants.
The CI, which is computed for each of the 3 dimensions as well as for other indicators in the survey, is the percentage of respondents that answered in the affirmative less the percentage of respondents that answered negative for a given indicator. A positive CI indicates that respondents with favorable views outnumber those with unfavorable views, except for unemployment, change in prices and interest rate for borrowing money, where a positive CI indicates the opposite.
1 The US credit rating downgrade by Standard and Poor's was announced on 5 August 2011.
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