Gregorio E.

Baccay III, DPA

Think Out Loud

Email: gregbaccay@gmail.com

Consumer Confidence More Upbeat for Q2 2018

Consumer outlook improves for Q2 2018

Consumer confidence was more optimistic for Q2 2018, with the overall confidence index
(CI) increasing to 3.8 percent from 1.7 percent for Q1 2018. The higher CI indicates that the
optimists increased and continued to outnumber the pessimists. 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 positive outlook for Q2 2018 was mainly brought about by
their expectations of: (a) improvement in peace and order (b) additional income, (c) availability of
more jobs, (d) effective government policies, and (e) increase in family savings.

For the next quarter and the year ahead, consumers’ optimism remained generally steady,
as the CIs showed a fractional decline from previous quarter’s survey at 8.7 percent from 8.8
percent and at 23.1 percent from 24 percent, respectively. The relatively steady outlook for the
next quarter and the year ahead stemmed from the counterbalancing of the number of
respondents that reported more positive views on the economy, in anticipation of more jobs and
additional income, versus those with negative views due to expectations of higher prices of goods.

Consumer confidence turns positive on economic condition of the country and family finances
but weakens on family income for Q2 2018

Consumer outlook is measured across three component indicators, namely, the country’s
economic condition, family financial situation, and family income. For Q2 2018, the improved
consumer sentiment on the country’s economic condition and family financial situation
outweighed the less favorable outlook on family income. Notably, the CIs for the country’s
economic condition and family financial situation reverted to positive territory for the current
quarter while family income edged lower from a quarter ago. For the near term and the year
ahead, consumer confidence on economic condition of the country was more optimistic while
outlook on family financial situation and income turned less positive compared to the previous
quarter’s survey results.

Consumer outlook across income groups improves for the current quarter

Consumer outlook across income groups improved for the current quarter but was mixed
for the next quarter and the year ahead. For the current quarter, the low-income group remained
pessimistic due to the expected higher prices of goods and low income, but the number that said
so declined relative to the previous quarter survey results. Meanwhile, the middle- and high-
income groups were both more optimistic for the current quarter as they anticipated
improvement in peace and order, additional income, and salary increase.
 For the next quarter, the sentiment of consumers was less favorable for the low-income,
broadly steady for the high-income but was more upbeat for the middle-income group. For the
year ahead, consumer outlook was more optimistic for the low-income group but was less
favorable for the middle- and high-income groups.

Consumers’ spending outlook for the next quarter is broadly steady

The spending outlook index of households on basic goods and services was broadly steady
at 36.3 percent for Q3 2018 from 37.1 percent in the prior survey report. Higher spending was
expected on house rent and furnishings, communication, education, recreation and culture, and
restaurants and cafes, indicating that inflationary pressures could come from these goods and
services. Meanwhile, fewer respondents indicated higher expenditures on food, non-alcoholic and
alcoholic beverages, water, electricity, fuel, and transportation. The spending outlook was
generally steady for clothing and footwear, medical care, and personal care and effects.

The percentage of households that considered the current quarter as a favorable time to
buy big-ticket items declined to 30.7 percent from 31.6 percent for Q1 2018. Meanwhile, the
buying intentions of respondents for big-ticket items were broadly steady at 11 percent for the
year ahead from the 10.1 percent in the previous survey round, due largely to the generally stable
buying intentions for motor vehicle and real estate and more robust buying intentions for
consumer durables.

The percentage of households with savings increases for Q2 2018

For Q2 2018, the percentage of households with savings rose to 37.4 percent from 36.6
percent in the previous quarter. The increase in the number of savers was observed in AONCR
while number of savers decreased in NCR.

Meanwhile, the percentage of respondents who reported that they could set aside money
for savings during the current quarter rose to 43.3 percent (from 41.8 percent for Q1 2018).

Consumers expect inflation and interest rates to increase and the exchange rate to depreciate
for the year ahead

The survey results showed that consumers anticipated inflation to increase, interest rates
to go up and peso to depreciate in the next 12 months. Respondents expected the rate of increase
in commodity prices to be above the government’s 2 to 4 percent inflation target range for 2018,
at 4.2 percent over the course of the next 12 months (lower than the anticipated 4.7 percent in
the Q1 2018 survey). Meanwhile, more respondents expected unemployment rates to rise while
fewer firms anticipated the interest rate to increase and the peso to depreciate against the US
dollar over the next 12 months compared to a quarter ago.

OFW households that utilize their remittances for savings decline while those for investment
increase for Q2 2018

Of the 446 households included in the survey that received OFW remittances for Q2 2018,
94.2 percent used the remittances that they received to purchase food and other household
needs. The proportion of households that said so as well as those that allotted part of their
remittances for education (64.1 percent), medical expenses (46.9 percent), debt payments (22.9
percent), savings (33.9 percent), purchase of appliances/consumer durables (21.1 percent),
purchase of house (8.7 percent), and purchase of car/motor vehicle (7 percent) declined.
Meanwhile, the percentage of OFW households who allocated part of their remittances for
investment (5.2 percent) and other miscellaneous expenses (4.9 percent) increased.

Debt-to-income ratio of surveyed respondents is 27 percent

More than one-third of the respondents and/or spouse are under debt situation at
present. For the current quarter, debt-to-income ratio of surveyed respondents was at 27
percent.