Consumer Sentiment Slightly Weakens in 3Q

Consumer sentiment slightly weakened in the third quarter of 2013 as the overall confidence index (CI) declined to ‐7.9 percent from ‐5.7 percent in the second quarter of the year, according to the Bangko Sentral ng Pilipinas (BSP). Despite the lower CI, the current quarter consumer confidence registered the second highest reading since the nationwide survey started in 1Q 2007.

Pessimists continued to outnumber the optimists, with the margin remaining narrow although slightly higher. Households that responded to the survey which was conducted between 1‐12 July 2013 cited the following reasons for their less favorable outlook for the current quarter: (a) low income due to factors such as poor harvests, no permanent work and downturn of businesses; (b) increase in the number of unemployed persons; and (c) higher household expenditures.

The decline in consumer outlook in the Philippines mirrored the weaker sentiment of consumers in Japan, Indonesia, Taiwan and Thailand but was in contrast to the bullish consumer confidence in Australia, Germany and China.

For the next quarter, consumer sentiment turned more favorable as the CI rose to 5.7 percent. Consumers attributed their more buoyant outlook to expectations of: (a) availability of more jobs as well as more working family member: (b) increased investments, (c) additional incomes, and (d) monetary benefits (bonuses) during the holiday season. Meanwhile, the consumer outlook for the year ahead remained steady at 15.8 percent.

Consumers’ views on the three indicators of consumer confidence–economic condition of the country, family financial situation and family income–also weakened in Q3 2013. Respondents’ outlook was lowest on the family financial situation, followed by the economic condition of the country, and family income. According to respondents, their outlook was dampened by low income levels and higher household expenditures.

For the next quarter, consumers were more upbeat on their family finances as respondents expected to receive their holiday bonuses/13th month pay. Meanwhile, their outlook on the country’s economic condition was broadly steady for the same period.

For the year ahead, perception on the three indicators of consumer confidence was mixed. On the one hand, respondents’ outlook was more favorable on their financial situation as they anticipated additional income. On the other hand, respondents’ outlook on their family income remained broadly steady.

However, the outlook on the country’s economy was less upbeat as respondents expected higher prices of goods and services for the year ahead, consistent with their views of higher inflation over the next 12 months.

By income group, the outlook of respondents from the low‐income group in the current quarter remained steady on their family finances but turned pessimistic with respect to their views about the country’s economy. Meanwhile, the outlook on all three indicators of consumer confidence was less favorable among the middle‐ and high‐income groups. Respondents indicated that the higher cost of goods and services was behind their weaker sentiment.

For the near term, mixed consumer sentiment was observed across income groups. The perception on the economic condition of the country was steady for the low‐income group, but declined for the middle‐ and high‐income groups. In terms of their finances, a more buoyant outlook was observed across income groups.

For the year ahead, the middle‐ and high‐income groups turned more optimistic across the three indicators, except for the outlook on the country’s economic condition which declined among respondents from the high‐income group. Nonetheless, the high‐income group continued to be the most optimistic across income groups. Meanwhile, the outlook of the low‐income group on their family income and the economic condition of the country weakened.

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