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Consumer Confidence Edges Lower in Q3 2014 But Remains Buoyant for the Year Ahead

09.12.2014

Consumer Outlook 

Consumer sentiment weakened in Q3 2014 based on the Consumer Expectations Survey that was conducted by the Bangko Sentral ng Pilipinas during the period 1 – 12 July 2014.  The overall confidence index (CI) decreased to -26.3 percent from -17.3 percent in Q2 2014. This CI indicates that the number of pessimists increased and continued to exceed the number of optimists in Q3 2014. 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 cited the following reasons for their bearish outlook during the current quarter: (a) rising prices of basic commodities; (b) political concerns such as issues about the Priority Development Assistance Fund (PDAF) and Disbursement Acceleration Program (DAP));  (c) higher household expenses; and  (d) concerns over income, employment opportunities and the business environment. For the next quarter (Q4 2014), consumer sentiment declined slightly from a neutral outlook of 0 percent  to -1 percent in the current quarter’s survey  as respondents anticipated  higher prices of commodities and expressed concerns over the utilization of government funds. Consumer outlook for the next 12 months was likewise less favorable but remained positive.

The overall consumer confidence is measured using three indicators–economic condition of the country, family financial situation and family income. For the current quarter and the year ahead, consumer outlook on the economic condition of the country registered the biggest decline across income groups as respondents’ sentiments were affected by higher commodity prices and the political noise. With regard to family finances and income, consumer outlook declined for the current quarter but improved for the next quarter across income groups in anticipation of good harvests, business upturns and additional benefits during the Christmas season (e.g., holiday bonuses and 13th month pay). For the year ahead, consumer outlook on all three indicators continued to be positive across income groups, except for the outlook on the country’s economy by the low-income group, which reverted to negative territory after posting positive CIs for the past eight quarters. The favorable outlook was driven by households that expect more jobs, improvement in the peace and order situation, and more investors in the country.

On buying sentiment, respondents’ spending outlook on basic goods and services held broadly steady at 42.2 percent in Q4 2014 (from 41.6 percent in the previous quarter).  The sustained spending outlook could be due to respondents’ more upbeat sentiment on family finances and income in the next quarter. Across commodity groups, more respondents expected an increase in expenditures on food, fuel, communication, restaurants and cafés, and personal care and effects while fewer respondents anticipated an increase in expenditures on clothing and footwear as well as on education. Meanwhile, the spending outlook was steady for house rent, water, electricity, medical care, and transportation.

Respondents 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 24.9 percent.  The outlook on buying conditions for real estate was the most optimistic, posting a record high of 32.6 percent since Q1 2007.  Meanwhile, a stable outlook was observed for buying conditions for consumer durables and motor vehicles. Similarly, buying intentions of respondents for all big-ticket items for the year ahead remained broadly unchanged at 9.3 percent.

Saving Behavior

Consistent with the less favorable outlook in Q3 2014, the number of households with outstanding savings declined to 26.9 percent compared to 30.3 percent in the previous quarter. Households with outstanding savings decreased among the middle-income group, remained steady for the low-income group, and increased for the high-income group.  According to respondents, they save money for the following reasons: (a) for emergencies,  (b) retirement, (c) health and hospitalization, (d) education, and (e) business capital and investment. Two-thirds (66.7 percent) of household savers have bank deposit accounts while 23.3 percent kept their savings at home and 10 percent put their money in cooperatives, paluwagan and other credit/loan associations.
 
Although the number of households with outstanding savings decreased, the percentage of respondents who reported that they could set aside money for savings during the current quarter was broadly stable at  34.9 percent (from 35.7 percent in Q2 2014). Moreover, the proportion of those that could save 10 percent or more of their monthly gross family income was almost unchanged at 35.6 percent (from 36.3 percent in Q2 2014). 

Expectations on Selected Economic Indicators

Respondents anticipated inflation to remain steady at 6.1 percent reflecting their outlook of a stable inflation for the year ahead. This indicates that inflationary expectations are likely to remain well-anchored in the next 12 months as the number of respondents with views of higher inflation  was almost unchanged compared to a quarter ago. Meanwhile, more respondents expected interest rates to increase as the CI edged higher 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. Meanwhile, more respondents expected unemployment to rise over the next 12 months as the CI increased to 59 percent from 54.5 percent in the last quarter’s survey.

Expenditures of Overseas Filipino Workers (OFWs)

Of the 592 households included in the survey that received OFW remittances in Q3 2014, 95.9 percent used the remittances that they received to purchase food.  More than two-thirds (67.1 percent) of the OFW households allocated part of their remittances for education, 56.3 percent for medical expenses and 42.7 percent for debt payments. The percentage of OFW households that utilized their remittances for savings remained strong at 39.7 percent, albeit lower than the 46.6 percent recorded in Q2 2014. Similarly, those that allocated their remittances for investment and for the purchase of consumer durables and house decreased. Meanwhile, those that apportioned part of their remittances to purchase cars/motor vehicles remained steady.

About the survey

The Q3 2014 CES was conducted during the period 1 – 12 July 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 6,106 households, of which 3,031 (49.6 percent) were from NCR and 3,075 (50.4 percent) from AONCR.  Of the total sample size, 5,948 households responded to the survey equivalent to a response rate of 97.4 percent (from 97.5 percent in the last quarter’s survey). This consists of 2,967 households or 97.9 percent (from 97.9 percent) in NCR and 2,981 households or 96.9 percent (from 97 percent) in AONCR.

For inquiries, please contact the Department of Economic Statistics

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