Inflation, water crisis weaken consumer outlook in Q2 2019

Ralf Rivas
Inflation, water crisis weaken consumer outlook in Q2 2019
Consumers were pessimistic, but businesses were upbeat for the 2nd quarter of 2019, according to Bangko Sentral ng Pilipinas surveys

MANILA, Philippines – Consumer outlook remained negative during the 2nd quarter of 2019, while businesses were more upbeat, surveys done by the Bangko Sentral ng Pilipinas (BSP) showed.

The Consumer Expectations Survey (CES) outlook showed a marginal decline during the 2nd quarter to -1.3% from 0.5% in the 1st quarter of 2019.

The CES found that consumers’ negative outlook was due to their expectations of higher prices of goods and household expenses. Consumers also cited poor health and high medical expenses, as well as the water crisis.

Negative sentiments were counterbalanced by their optimistic expectations on peace and order, additional income, availability of jobs, good governance, and more working family members.

Consumers’ spending outlook on basic goods and services also declined to 32.7% from 39.6%.

“The survey results showed that consumers anticipated inflation, interest and unemployment rates to increase, and the peso to depreciate for the next 12 months,” the BSP said.

Business confidence

While consumers were pessimistic, businesses were upbeat. The Business Expectations Survey (BES) found that business outlook for the 2nd quarter rose to 40.5% from 35.2% in the 1st quarter.

Respondents attributed the positive outlook to the usual uptick in demand during summer, election-related spending, increase in orders and projects, expansion of businesses and new product lines, and rollout of government infrastructure and development projects. 

“They were also optimistic that their business operations would benefit from the favorable macroeconomic conditions in the country, particularly the easing of inflation in 2019,” the BSP said.

For the 3rd quarter, business outlook declined to 47.6% from 52% in the 2nd quarter. Business optimism was dampened on the back of expectations of interruption of business activities during the rainy season and stiffer competition.

Exporters were the most bullish for the 2nd quarter on account of improved availability of raw materials, increase in demand for business process outsourcing, call centers, and easing domestic prices. 

Importers and domestic-oriented firms likewise were generally more optimistic as they expected that economic growth would be driven by robust consumer demand.

The BES results showed that businesses were anticipating the peso to strengthen, inflation to decrease, but interest rates to increase for the 2nd quarter. –

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.