Businesses less upbeat, consumer sentiment improved in Q1 —BSP

The business sector was less upbeat about the country’s economy while consumer confidence improved, albeit still pessimistic, in the first quarter of 2024, results of the latest Bangko Sentral ng Pilipinas (BSP) surveys showed.

According to the latest Business Expectation Survey (BES), business confidence turned less optimistic as the overall confidence index (CI) slipped to 33.1% in the January to March 2024 period from 35.9% in the October to December 2023 period.

“This is reflective of the combined decrease in the percentage of optimists and increase in the percentage of pessimists,” the BSP said.

The central bank said firms’ less optimistic view in the first quarter was due to the following concerns:

• post-holiday decline in demand for goods and services and slowdown in business activities,
• persistent inflationary pressures stemming from higher food and oil prices and its impact on the economy,
• stiff competition, and
• adverse effects of a strong El Niño event in 2024 on the agriculture sector.

The business sector also expected that cash or liquidity positions would remain tight as the financial condition index stayed negative at -15.5% from -15.1%. 

Moreover, firms anticipated that the inflation and peso borrowing rates may rise in the first half of 2024 and the next 12 months.

Companies, likewise, expected that inflation may remain above the upper end of the government’s 2% to 4% target, particularly seeing that inflation rate may average at 5% in the first half of 2024 and the next 12 months.

Consumer sentiment 

Meanwhile, consumer sentiment saw an improvement, although still pessimistic, during the period.

Consumers’ overall CI in the first quarter improved to -10.9% from -19%.

“This improvement means that although the pessimists continued to outnumber the optimists, the number of pessimists declined compared to the fourth quarter 2023 survey results,” the BSP said.

The central bank said consumers attributed their improved outlook on additional and higher income, availability of more jobs and permanent employment, and additional working family members.

The BSP added that consumers were less pessimistic with respect to the country’s economic condition and the family’s financial situation in the January to March period while their pessimistic outlook for family income was little changed. 

Moreover, consumer confidence was less pessimistic across all income groups —low-, middle-, and high-income groups, according to the central bank.

The latest Consumer Expectation Survey also showed that 24.9% of households availed of a loan in the last 12 months, higher than the 22.9% recorded in the previous quarter. 

The percentage of households with savings, likewise, increased to 33.5% from 29.1% quarter-on-quarter.

“Consumers anticipate that the interest rate may increase, and the peso may depreciate against the US dollar for Q1 2024, Q2 2024, and the next 12 months,” the BSP said.

The central bank added that households expected that the unemployment rate may rise albeit at a slower pace in the first two quarters but may decline in the next 12 months. 

“Households also expect that the inflation rate may rise for all reference periods. Specifically, consumers are expecting that the inflation rate may average at 5.3% for the next 12 months, which is above the upper end of the National Government's inflation target range of 2% to 4% for 2024-2025,” the BSP said.—AOL, GMA Integrated News