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Consumer Confidence Declines Moderately in Q4 2011 But Turns Upbeat in the Year Ahead


Consumer confidence is slightly lower in Q4 2011 but turns upbeat in the year ahead
Consumer optimism is slightly lower in Q4 2011 as the overall confidence index (CI) declined to -20.6 percent compared with the prior reading of -18.7 percent in Q3 2011. The CI is the percentage of respondents that answered in the affirmative less the percentage of respondents that answered negative for a given indicator. The current quarter CI indicates that the number of households with an optimistic view decreased and continued to be less than those who think otherwise. The reasons cited by the majority of the respondents for the less favorable outlook included the damage to crops and businesses caused by typhoons Pedring and Quiel, higher prices of basic commodities and unemployment.  Less optimistic consumer sentiment was likewise recorded in China, Thailand, India and Singapore. Going forward, Filipinos expected better times ahead, with the CI for the next quarter and the year ahead rising to 2.8 percent and 14.6 percent, respectively.

Consumers’ perception about family finances and family income weakens but outlook on the economy improves

Perception was measured on three indicators of consumer confidence─the country’s economic condition, family financial situation and family income. The overall CI is computed as the average CI across these 3 dimensions. The decline in consumer confidence for the current quarter was driven by the less favorable outlook on family finances and family income, which outweighed the improvement in confidence on the country’s economic condition. Respondents’ expectations of increased number of investors in the country contributed to their upbeat outlook on the country’s economy. However, this was offset by the continued high price of goods and services, poor harvest and low income, which dampened their sentiment on their family’s finances.

Sentiment across all income groups turns less optimistic 

Consumer sentiment across all income groups was less optimistic in the current quarter. The biggest decline in optimism was registered by the high-income group, followed by the middle- and the low-income groups. Nevertheless, the high-income group remained to be the most optimistic among the survey respondents in Q4 2011. 

Spending outlook on basic goods and services improves in Q1 2012

More households expected their expenditures on basic goods and services to increase in Q1 2012. Respondents nationwide anticipated the increase in expenditures on all types of basic goods and services, particularly, food, electricity and transportation. They attributed the higher expenditures to the expected hikes in the prices of basic commodities over the next 12 months.

Buying conditions are more favorable

Despite the weaker current quarter sentiment, more respondents considered Q4 2011 a favorable time to buy big-ticket items. The buying conditions index during the quarter reached its highest level in four years. Consumers’ outlook on buying conditions was most upbeat for real estate, followed by consumer durables and motor vehicles. Easy installment terms contributed to consumers’ favorable buying conditions outlook in the current quarter.

Buying intentions are more buoyant in the year ahead

Buying intentions for big-ticket items in the year ahead surged to 10.0 percent, the highest since Q2 2008. This was largely due to the rise in buying intentions for consumer durables and real estate, which offset the decline in buying intentions for motor vehicles. The overall improvement in buying intentions is consistent with the more favorable consumer sentiment on family income and family financial situation for the near term and the year ahead.

Outlook on interest rates, employment and the exchange rate improves for the next 12 months

Fewer respondents anticipated an increase in the unemployment rate over the next 12 months, indicating an expected improvement in the employment situation in the year ahead. Likewise, fewer respondents expected interest rates to go up in the next 12 months. This is consistent with the latest developments in the financial markets, as several central banks have reduced their policy rates or kept policy rate settings unchanged in order to stimulate their domestic economies in the face of very challenging global economic conditions. Meanwhile, respondents expected inflation to reach 9.6 percent, up from 8.5 percent in the Q3 2011 survey, reflecting expectations of higher prices in the year ahead given pending petitions for electricity rate adjustment and the possibility of higher domestic rice prices. More respondents also expected the peso to appreciate against the US dollar in the next 12 months due to sustained investment and overseas Filipinos’ remittance inflows.

More OFW households utilize their remittances for savings and big-ticket items

Of the 563 households that received OFW remittances in Q4 2011, 95.0 percent used remittances for food. Nearly three-fourths of the households surveyed (70.0 percent) allocated their remittances for education, 60.9 percent for medical payments and 45.8 percent for debt payments. Likewise, the percentage of OFW households that utilized their remittances for savings increased to 42.6 percent (from 35.5 percent in Q3 2011). Those that apportioned part of their remittances to purchase consumer durables, housing, and motor vehicles also went up compared to the previous quarter’s survey results. Meanwhile, the percentage that apportioned part of their remittances for investment dropped quarter-on-quarter (from 9.1 percent to 6.4 percent) but increased year-on-year.

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 Q4 2011, the CES was conducted during the period 3-14 October 2011 with a total sample size of 6,028 households, of which 2,977 (49.4 percent) were from the NCR and 3,051 (50.6 percent) from the AONCR. The nationwide total survey response rate for Q4 2011 was 97.5 percent (from 97.4 percent in the last quarter’s survey).

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