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Consumer Confidence Improves in Q1 2015 on Lower Oil Prices and Higher Household Income

03.27.2015

Consumer Outlook 

Consumer sentiment improved in Q1 2015 as the overall confidence index (CI) increased to -10 percent from  -21.8 percent in Q4 2014. The higher (but still negative) CI in Q1 2015 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.

According to respondents, their improved outlook during the current quarter was due to expectations of:  (a) lower oil prices and stable prices of commodities; (b) higher family income leading to more savings; (c) availability of more jobs and increase in the number of employed family members; (d) appreciation of the peso; and (e) improvement/development in road infrastructure.  Respondents also cited less calamities, less corruption in the government and more assistance from government such as the Pantawid Pamilyang Pilipino Program (4Ps), as factors for their improving outlook. 

For the next quarter  (Q2 2015) and the year ahead, consumer sentiment continued to be more favorable as the next quarter CI increased and remained in the positive territory at 4.4 percent (from 0.7 percent in the previous quarter’s survey), while the year ahead CI jumped to 17.3 percent (from 9.6 percent in the previous quarter’s survey). This indicates that the number of consumers with favorable views increased and exceeded those with unfavorable views.

Consumer confidence is measured across three indicators, namely, the country’s economic condition, family financial situation and family income. Consumer confidence on the country’s economic condition and family financial situation picked up for the current quarter, the next quarter and the year ahead. Notably, the CIs with the biggest improvement were recorded on the country’s economic condition, followed by family finances. Similarly, the outlook on family income in the current quarter was more sanguine but remained broadly steady for the next quarter and the year ahead. These indicate households’ growing confidence in the country’s economic condition and their own family finances.

The improvement in consumer outlook was broad-based and evident across income groups with the middle-income group showing the biggest improvement in sentiment, followed by the low-income group.  The high-income group, however, continued to be the most bullish across income groups.

The spending outlook index of households on basic goods and services remained positive but declined to a record low of 30 percent in Q2 2015 (from 41.8 percent in the previous quarter), as respondents expected inflation to decelerate over the next 12 months. Even as majority of respondents continued to expect higher spending on basic goods and services, the number that said so declined compared to a quarter ago, indicating that the growth rate in consumer spending could slow down in the near term. The spending outlook index declined across commodity groups except for water, which remained steady. The biggest declines were observed for fuel; food, non-alcoholic and alcoholic beverages; transportation; and communication.

The percentage of households that considered the current quarter as a favorable time to buy big-ticket items increased to an all-time high of 28.4 percent (from 24 percent in Q4 2014). The outlook on buying conditions for real estate was the most optimistic, followed by consumer durables and motor vehicles, which all posted record-high indices since Q1 2007.  Buying intentions of respondents for all big-ticket items for the year ahead improved, with the index increasing to 11.6 percent from 10.4 percent a quarter ago.

Saving Behavior

In Q1 2015, the number of households with savings reached a record high of 31.6 percent from  25.7 percent in the previous quarter. Households with savings increased across all income groups, with the middle-income group posting the highest increment quarter-on-quarter followed by the low-income group.  According to respondents, they save money for the following reasons: (a) for emergencies, (b) education, (c) health and hospitalization, (d) retirement, and (e) business capital and investment. More than two-thirds (68.5 percent) of household savers have bank deposit accounts while 39 percent kept their savings at home and 24.9 percent put their money in cooperatives, paluwagan and other credit/loan associations.

The percentage of respondents who reported that they could set aside money for savings during the current quarter reached an all-time high of 40.9 percent (from 35.6 percent in Q4 2014). However, the proportion of those that could set aside 10 percent or more of their monthly gross family income declined to 36.2 percent (from 38 percent in Q4 2014). 

Expectations on Selected Economic Indicators

The number of consumers who anticipated prices to go up in the year ahead declined compared to the previous quarter’s survey results. This is consistent with their mean inflation expectations of 3.8 percent, lower compared to 5.8 percent in Q4 2014 and conforms to the inflation expectations in the January 2015 BSP’s survey of private sector economists and the February 2015 Consensus Economics Inc.’s survey of Asia Pacific financial and economic forecasters.  Likewise, respondents expected interest rates to increase and the peso to appreciate against the US dollar for the next 12 months. Moreover, fewer respondents expected unemployment to go up for the next 12 months, indicating more opportunities in the labor market.

Expenditures of Overseas Filipino Workers (OFWs)

Of the 602 households included in the survey that received OFW remittances in Q1 2015, 98.5 percent used the remittances that they received to purchase food and other household needs. More than half  (56.6 percent) of the OFW households allocated part of their remittances to medical expenses and  41.9 percent to debt payments. Compared to the previous quarter’s survey results, the percentage of OFW households that utilized their remittances for education, 65.6 percent (from 72.2 percent); savings,  39.4 percent (from 42.1 percent); investment, 5.1 percent (from 6.8 percent); and purchase of car/motor vehicle, 5.1 percent (from 6.8 percent) declined, while those that allotted their remittances to purchase food and other household needs, and house increased.

About the survey

The Q1 2015 CES was conducted during the period 26 January – 5 February 2015. The CES samples were drawn from the Philippine Statistics Authority (PSA) 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 sample size of 5,818 households, of which  2,851 (49 percent) were from NCR and 2,967 (51 percent) from AONCR. Of the sample size, 5,705 households responded to the survey, equivalent to a response rate of 98.1 percent (from 97.6 percent in the last quarter’s survey). This consists of 2,817 households (or 98.8 percent response rate) in NCR and 2,888 households (or 97.3 percent response rate) in AONCR. Nearly half of the respondents (46.5 percent) were from the low-income group, 37.8 percent from the middle-income group, and 15.7 percent from the high-income group.

For inquiries, please contact the Department of Economic Statistics

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