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Consumer Outlook Improves in the Fourth Quarter of 2005 and the First Quarter of 2006

11.28.2005

Outlook of all income groups improves

Consumer outlook of respondents belonging to major income groups generally improved in the fourth quarter of 2005 and the first quarter of 2006 with indices of all groups on the uptrend compared to the last quarter’s survey.

Reasons for improved consumer outlook

Respondents cited expectations of: 1) additional income; 2) more jobs available; 3) sound government policies; and 4) overseas jobs as factors for their optimism.

Family income improves 

Respondents  expected  the  contraction in the average family income to  ease by -6.6 percent in the fourth quarter compared to -7.4 percent in the previous quarter. By 2006, consumers anticipate their family income to expand by 0.2 percent in the first quarter of 2006 and further rise by 2.7 percent one year forward. 

Family expenditures increase                       

Consistent with the anticipated increase in family income, respondents expected family expenditures on basic goods and services to rise by an average of 6.2 percent in the first quarter of 2006. They expected higher expenses on basic commodities such as food, electricity, fuel, water and transportation, clothing and footwear, and lower expenditures on house rent, education, communication, hotels and restaurants, medical care, and personal care and effects.

Buying conditions remain steady, buying intentions up

The buying conditions index for the current quarter remained steady at 31.9 percent. Results of the survey show that buying conditions for house and lot, and motor vehicles improved while buying conditions for consumer durables declined in the fourth quarter of 2005.

More consumers also expressed that they intend to buy assets in the next 12 months as indicated by the DI of 24.8 percent. This was higher compared to the 23.7 percent in the previous quarter’s survey. Except for consumer durables, consumer intentions to purchase house and lot as well as motor vehicles were on the uptrend.

Views on selected economic indicators better than last quarter

Survey response indicated that unemployment, interest and inflation rates would increase, although the outlook would be better compared to the third quarter of 2005. Specifically, inflation for the next 12 months would slow down to 7.4 percent, compared to 7.6 percent in the previous quarter, with the highest price increases anticipated in utilities, transportation, fuel and food.

Meanwhile, respondents expected the peso would depreciate in the last quarter of 2005 up to the end of 2006.

Focus on Overseas Filipino Workers

 Among the respondents surveyed, 223 or 9.7 percent have at least one OFW in their household, with 94.2 percent of them having remitted money to their families in the last twelve months. OFW households indicated that remittances were largely spent for food and other household needs, and likewise channeled to savings, purchase of appliances and houses, financing of education, business investments and to other expenses such as medicine and debt payment.

Overall consumer outlook improves

Overall consumer outlook improved in the fourth quarter 2005 as the average diffusion index (DI) went up by 1.4 index points compared to the previous survey. All the three component indices showed slight improvements. Specifically, the family financial situation index improved by 2.4 index points, level of family income index by 1.3 index points, and the index of the economic condition of the country by 0.6 index points from the previous survey.

Consumer expectations for the first quarter of 2006 continued to be positive supported by a better outlook in the level of family income, family financial situation, and economic condition of the country.  This view can be attributed to expectations of better macroeconomic fundamentals next year. 

Survey profile

The fourth quarter 2005 CES was conducted on 1-7 October 2005, and covered a sample size of 2427 households in the National Capital Region (NCR) using a multistage stratified random sampling scheme. The survey response rate for the fourth quarter of 2005 was higher at 94.7 percent compared to 93.5 percent in the previous survey.

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