Consumer sentiment improved moderately in Q1 2014 based on the Consumer Expectations Survey that was conducted by the Bangko Sentral ng Pilipinas during the period 21 January – 3 February 2014. The overall confidence index (CI) increased to -18.8 percent from -21.3 percent in Q4 2013. Respondents attributed their favorable outlook to the following factors: (a) availability of more jobs, (b) increase in the number of employed family members, (c) more investment prospects, (d) higher income, (e) stronger business activity, and (f) good harvests (e.g., copra, sugarcane and fish). For the next quarter and the year ahead, consumer sentiment continued to be more favorable as the CI increased to 5.4 percent and 19.3 percent, respectively, compared to the readings of the previous quarter. According to consumers, their more optimistic outlook is due to expectations of more job opportunities and good weather conditions in the quarter ahead.
The overall consumer confidence is measured using three indicators–economic conditions of the country, family financial situation and family income. For the current quarter, respondents’ outlook on the country’s economic condition and on family finances improved but remained steady on family income. For the next quarter and the year ahead, consumers’ views on all three indicators turned more sanguine as consumers expected continuing improvements in the economy and in their family finances. Consumers cited the following reasons for their upbeat outlook: (a) more financial support from family members as employment opportunities are expected to be better, (b) continued implementation of Pantawid Pamilyang Pilipino Program (4Ps), and (c) good governance.
By income group, consumer sentiment was mixed with respect to their views on family finances and income. The low-income group showed a consistently more favorable outlook for the current and next quarters as well as for the year ahead. The middle-income group’s outlook weakened in the current quarter but turned more bullish for the next quarter and the year ahead. Meanwhile, the high-income group had a less upbeat outlook for the current and next quarters but anticipated financial conditions to improve in the next twelve months. Across income groups, confidence on the economic condition of the country improved.
The percentage of respondents that considered the current quarter as a favorable time to buy big-ticket items was broadly steady at 24.1 percent. The outlook on buying conditions improved slightly for real estate, but remained steady for consumer durables and motor vehicle. Respondents cited that real property is a good investment. Similarly, buying intentions for big-ticket items for the year ahead remained broadly steady at 8.8 percent.
The survey results showed that the number of households with savings continued to pick up at 28.9 percent in Q1 2014 compared to 26.2 percent in the previous quarter. The percentage of households with savings increased among the middle- and low-income groups but declined for the high-income group. The percentage of those that expected to save money in Q1 2014 increased to 38.3 percent from 34.6 percent in Q4 2013. Respondents stated that they are setting aside some amount as savings for the following reasons: for emergency, health and hospitalization, retirement, education, and business capital and investment. Among respondents with savings, majority have bank deposit accounts.
Expectations on Selected Economic Indicators
Consistent with the higher spending outlook on basic goods and services in Q1 2014, consumers anticipated higher inflation in the year ahead. They expected the inflation rate to settle at 8.4 percent compared to 7 percent in Q4 2013. This indicates that inflationary expectations could be stronger in the next 12 months as the number of respondents with views of higher inflation increased compared to a quarter ago. Their views mirrored the increasing trend in the inflation readings in January (4.2 percent) and February (4.1 percent) 2014 as compared to that in Q4 2013 (3.4 percent). Interest rates were likewise anticipated to edge higher in the year ahead as respondents expecting higher interest rates outnumbered those who said otherwise. Respondents are also of the view that the peso would depreciate against the US dollar in the next 12 months. Their perception could have been influenced in part by the recent weakening of the peso against the dollar (average peso per dollar rate during 21 January – 3 February 2014, the duration of the survey, was ₱45). Respondents that expected higher unemployment declined compared to a quarter ago, indicating an expected improvement in the employment situation for the year ahead.
Expenditures of Overseas Filipino Workers (OFWs)
Of the 560 households included in the survey that received OFW remittances in Q1 2014, 97 percent used the remittances that they received to purchase food. More than two-thirds (68.9 percent) of the OFW households allocated part of their remittances for education, 62.9 percent for medical payments and 45.9 percent for debt payments. The percentage of OFW households that utilized their remittances for savings rose to 45.4 percent from 41.6 percent in Q4 2013, the second highest percentage since the nationwide survey started in Q1 2007. Similarly, those that allocated their remittances for the purchase of property increased to 13 percent from 12 percent in Q4 2013. Meanwhile, those that apportioned part of their remittances for investment and purchase of consumer durables and motor vehicle went down compared to the previous quarter’s results.
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