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Consumer Confidence Turns Bearish for Q2 2015

06.11.2015

Consumer Outlook 

Consumer sentiment weakened for Q2 2015 as the overall confidence index (CI) fell to -16.2 percent from -10 percent for Q1 2015. This indicates that the number of pessimists increased and continued to exceed the number of optimists for Q2 2015. 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 bearish outlook during the current quarter was due to the following: (a) anticipated higher prices of commodities due to increase in domestic oil prices, power rate hike and higher tuition fees, which could lead to higher household expenditures; (b) expected increase in the number of unemployed persons as new graduates enter the labor force; and (c) perceived graft and corruption in the government. Respondents also cited their concerns on the peace and order situation in the country following the death of 44 members of the Special Action Force (SAF 44) and the political issues behind it, occurrence of calamities such as fire, typhoons, and floods as well as the impact of the El Niño dry spell on agricultural output as reasons behind their weaker outlook.

The less favorable consumer sentiment was carried to the next quarter as the CI reverted to negative territory at  -0.4 percent for Q2 2015 from 4.4 percent for Q1 2015. Consumers attributed their less optimistic outlook to concerns over the perceived graft and corruption in the government and expected occurrences of typhoons and other calamities as well as the effects of the El Niño phenomenon. Meanwhile, consumer confidence for the next 12 months remained broadly steady at 16.4 percent from 17.3 percent in the previous quarter’s survey.

The quarter-on-quarter decline in confidence was broadly observed across the three component indicators of consumer confidence—the country’s economic condition, family financial situation, and family income. Respondents’ outlook was lowest on the economic condition of the country, followed by family financial situation, and family income.  The more pessimistic view of respondents on the current condition of the economy was largely behind their lower consumer confidence for Q2 2015. For the next quarter and the year ahead, the biggest drop in consumer sentiment was also reported in the outlook on the macroeconomy. Consumers’ outlook on the economic condition of the country was weighed down by concerns over expectations of higher prices of goods and unemployment. Meanwhile, the outlook on family income as well as on family financial situation was more buoyant for the year ahead as respondents anticipated increases in family income due to higher salary and better harvest.

The less sanguine consumer outlook for the current and next quarters was more evident among respondents in the low- and middle-income groups as their optimism declined across all indicators of consumer confidence. Respondents in the high-income group likewise had a weaker outlook on the country’s economic condition but they expected an improvement in their family finances and income. For the next 12 months, consumer confidence declined for the low-income group but remained steady for the middle- and high-income groups.

Spending Outlook

As respondents anticipated higher prices of basic commodities, the spending outlook on basic goods and services for the next quarter went up, with the CI at 32.2 percent (from 30 percent in the previous quarter). This indicates that the number of respondents who expect to spend more on goods and services increased compared to those who said otherwise. The spending outlook index rose across commodity groups, except for electricity, and personal care and effects, which remained broadly steady. The biggest increases were observed for fuel, transportation, education, and restaurants and cafes.

The percentage of households that considered the current quarter as a favorable time to buy big-ticket items increased to 30.3 percent (from 28.4 percent for Q1 2015). The more favorable outlook on buying conditions was due primarily to the improved outlook on buying conditions for real estate. The three big-ticket items posted all-time high indices since the start of the nationwide survey in Q1 2007. Buying intentions of respondents for  big-ticket items for the year ahead improved, with the index increasing to 12.6 percent from 11.6 percent a quarter ago. Buying intentions for real estate and motor vehicles improved while buying intentions for consumer durables remained broadly steady.

Saving Behavior

For Q2 2015, households with savings reached an all-time high of 33.9 percent from 31.6 percent in the previous quarter. The proportion of households with savings increased across all income groups, with the high-income group posting the highest increment quarter-on-quarter, consistent with their more optimistic outlook on family finances and income during the current quarter.  According to respondents, they save money for the following reasons: (a) emergencies, (b) education, (c) health and hospitalization, (d) retirement, and (e) business capital and investment. More than two-thirds (68.8 percent) of household savers had bank deposit accounts while 38.3 percent kept their savings at home and 22.6 percent put their money in cooperatives, paluwagan, other credit/loan associations   and as investments.

Although households anticipated higher consumer spending, the percentage of respondents who reported that they could set aside money for savings during the current quarter reached a record high at 42.4 percent (from 40.9 percent for Q1 2015). The proportion of those that could set aside 10 percent or more of their monthly gross family income remained broadly steady at 36.5 percent (from 36.2 percent for Q1 2015).

Expectations on Selected Economic Indicators

More respondents anticipated prices to go up compared to a quarter ago, but they expect inflation to be broadly steady at 3.7 percent (from 3.8 percent in the previous quarter). This indicates that inflation is likely to remain steady in the next 12 months, consistent with the results of the April 2015 Consensus Economics inflation forecast survey for the country that showed unchanged mean inflation forecasts for 2015. Meanwhile, inflation expectations based on the results of the  April 2015 BSP’s survey of private sector economists yielded lower mean inflation forecasts for 2015, supporting the assessment of within-target inflation outlook.  Respondents were also of the view that the peso would depreciate against the US dollar in the next 12 months. Meanwhile, more respondents expected interest rates to increase as the CI edged higher for this quarter’s survey. Likewise, more respondents expected unemployment to rise over the next 12 months as the CI increased to 56.6 percent from 44.5 percent in the last quarter’s survey.

Expenditures of Overseas Filipino Workers (OFWs)

Of the 580 households included in the survey that received OFW remittances for Q2 2015, 97.2 percent used the remittances that they received to purchase food and other household needs, lower than the previous quarter’s result of 98.5 percent. More OFW households allocated part of their remittances for education (71 percent), medical expenses (63.3 percent) and debt payments (43.1 percent). The percentage of OFW households that utilized their remittances for savings increased to 49.7 percent, the second highest reading since Q1 2007. Similarly, those that allocated their remittances for investment and for purchase of motor vehicle increased. Meanwhile, those that allotted their remittances for the purchase of consumer durables and house remained broadly steady.

About the survey

The Q2 2015 CES was conducted during the period 1 - 15 April 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 6,151 households, of which 2,963 (48.2 percent) were from NCR and 3,188 (51.8 percent) from AONCR. Of the sample size, 5,973 households responded to the survey, equivalent to a response rate of 97.1 percent (from 98.1 percent in the last quarter’s survey). This consists of 2,912 households (or 98.3 percent response rate) in NCR and 3,061 households (or 96 percent response rate) in AONCR. Nearly half of the respondents (43.6 percent) were from the low-income group, 39.6 percent from the middle-income group, and 16.8 percent from the high-income group.

For inquiries, please contact the Department of Economic Statistics

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