Consumer sentiment continued to improve in Q2 2014 based on the Consumer Expectations Survey that was conducted by the Bangko Sentral ng Pilipinas during the period 1 – 12 April 2014. The overall confidence index (CI) edged up to -17.3 percent from -18.8 percent in Q1 2014. The higher (but still negative) CI in Q2 2014 means that the number of households with an optimistic outlook increased but they continued to be outnumbered by those who think otherwise. The CI is computed as the percentage of households that answered in the affirmative less the percentage of households that answered in the negative with respect to their views on a given indicator.
Respondents attributed their more favorable outlook to the following factors: (a) availability of jobs as well as increase in the number of employed family members, (b) increasing family income due to higher salary, stronger business activity, and better harvest, (c) stepped-up road infrastructure projects, (d) more investment prospects in the country, and (e) improvement of the peace and order situation. For the next quarter (Q3 2014) and the year ahead, consumer sentiment turned less upbeat as the CI declined to a neutral value of 0 percent (from 5.4 percent in Q1 2014) and 15.9 percent (from 19.3 percent in Q1 2014), respectively. According to respondents, their less sanguine outlook stemmed from expectations of lower income due partly to poor harvests and slower business activities during the rainy season which could cause work interruptions. They also cited as reasons for their less favorable outlook their expectations of higher household expenses (e.g., education and maintenance medicines) and less job opportunities, consistent with their views of higher unemployment over the next 12 months.
The overall consumer confidence is measured using three indicators–economic condition of the country, family financial situation and family income. For the current quarter, respondents were more confident about the country’s economic condition and their family income. Meanwhile, their outlook on family finances remained unchanged. For the next quarter and the year ahead, consumer sentiment on all three indicators turned less sanguine in view of the anticipated slowdown in economic activity during the rainy season as well as the lingering issues on graft and corruption in the government.
By income group, the improvement in consumer sentiment for the current quarter was driven by the increase in confidence of the high- and middle-income groups. Notably, consumer confidence on family finances and income of the middle-income group reached record high CIs at 2.1 percent and 12.4 percent, respectively. Meanwhile, the outlook of the low-income group declined on family finances and income even as their outlook on the economy improved. For the next quarter and the year ahead, sentiment across income groups turned less upbeat.
On buying sentiment, the positive spending outlook of respondents on basic goods and services remained steady in Q3 2014. Across commodity groups, fewer respondents expected higher spending on clothing and footwear, house rent, electricity, fuel, medical care, communication, restaurants and cafés, and personal care and effects while more respondents anticipated an increase in expenditures on food, water and education due largely to the opening of the school year. Meanwhile, the spending outlook was steady for transportation.
Respondents also considered the current quarter as a favorable time to buy big-ticket items. The percentage of respondents that said so recorded an all-time high level at 24.6 percent. The outlook on buying conditions for real estate was the most optimistic, posting a record high of 32.2 percent since Q1 2007 while a stable outlook was observed for buying conditions for consumer durables and motor vehicle. Meanwhile, buying intentions of respondents for all big-ticket items for the year ahead remained unchanged at 8.6 percent.
The survey results showed that the number of households with savings continued to rise at 30.3 percent compared to 28.9 percent in the previous quarter. Households with savings increased among the middle- and high-income groups but remained steady for the low-income group. According to respondents, they save money for the following reasons: (a) for emergency, (b) health and hospitalization, (c) retirement, (d) education, and (e) business capital and investment (e.g., house and lot).
Almost two-thirds (65.2 percent) of household savers have bank deposit accounts while 23.5 percent kept their savings at home and 11.4 percent put their money in cooperatives, paluwagan and other credit/loan associations as well as in government non-financial institutions, such as SSS, Pag-ibig and PhilHealth.
Although the number of savers increased, the percentage of respondents who could set aside money for savings in Q2 2014 declined to 35.7 percent from 38.3 percent in Q1 2014. Moreover, those that could save 10 percent or more of their monthly family income decreased to 36.3 percent from 43.2 percent in the previous quarter’s survey results.
Expectations on Selected Economic Indicators
Respondents anticipated inflation to decline to 6.1 percent from 8.4 percent in Q1 2014, reflecting their outlook of more stable prices for the year ahead. This indicates that inflationary expectations could moderate in the next 12 months as the number of respondents with views of higher inflation decreased compared to a quarter ago. Likewise, consumers’ expectations of higher interest rates showed a declining trend as the CI edged lower for this quarter’s survey. Respondents are of the view that the peso would continue to depreciate against the US dollar in the next 12 months, although fewer respondents have indicated so compared to the previous quarter survey. Their perception could have been influenced in part by the continuous weakening of the peso against the dollar (average peso per dollar rate during 1 – 12 April 2014, the duration of the survey, was ₱45 compared to ₱44 in December 2013). Meanwhile, more respondents expected unemployment to rise over the next 12 months as the CI increased to 54.5 percent from 41.4 percent in the last quarter’s survey.
Expenditures of Overseas Filipino Workers (OFWs)
Of the 560 households included in the survey that received OFW remittances in Q2 2014, 96.1 percent used the remittances that they received to purchase food. More than two-thirds (69.5 percent) of the OFW households allocated part of their remittances for education, 64.6 percent for medical expenses and 48.9 percent for debt payments. The percentage of OFW households that utilized their remittances for savings rose to 46.6 percent from 45.4 percent in Q1 2014, the second highest percentage since the nationwide survey started in Q1 2007. Similarly, those that allocated their remittances for the purchase of consumer durables and for investment increased. Meanwhile, those that apportioned part of their remittances for motor vehicle and house remained broadly steady.
About the survey
The Q2 2014 CES was conducted during the period 1 – 12 April 2014. The CES samples were drawn from the Philippine Statistics Authority-National Statistics Office’s (PSA-NSO) Master Sample List of Households, which is considered a representative sample of households nationwide. The CES sample households were generated using a stratified multi-stage probability sampling scheme. It has a total sample size of 6,027 households, of which 2,959 (49.1 percent) were from NCR and 3,068 (50.9 percent) from AONCR. Of the total sample size, 5,875 households responded to the survey equivalent to a response rate of 97.5 percent (from 98.2 percent in the last quarter’s survey). This consists of 2,898 households or 97.9 percent (from 98.7 percent) in NCR and 2,977 households or 97 percent (from 97.7 percent) in AONCR.
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