Consumers more pessimistic in Q4 — BSP

CONSUMER and business sentiment declined in the fourth quarter due to elevated prices of goods, higher interest rates, and a weakening of the peso, according to the Philippine central bank.

The Bangko Sentral ng Pilipinas (BSP) on Friday said the consumer confidence index slipped to -14.6% from -12.9% in the third quarter, its 10th straight quarter of pessimism or since the -54.5% consumer outlook in Q3 2020, when the country locked down due to the coronavirus disease 2019 (COVID-19) pandemic.

However, this was higher than the -24% in fourth quarter last year.

Meanwhile, business confidence index fell to 23.9% from 26.1% in the prior quarter, marking its second straight decline.

“Consumers anticipated that interest and inflation rates may increase, the peso may depreciate against the US dollar, and the unemployment rate may decline in Q4 2022, Q1 2023, and the next 12 months,” the BSP said in a statement.

Consumer sentiment for the first quarter next year also worsened to 9.5% from 13.4% previously.

Consumers were also less upbeat on their long-term outlook, with the index falling to 21.7% for the next 12 months from 33.4%.

Although consumer sentiment for the next quarter and for the longer-term outlook were still positive, they were still less upbeat, BSP Department of Economic Statistics Senior Director Redentor Paolo M. Alegre, Jr. said in an online briefing on Friday.

“For consumers, they cited higher increase in prices of goods, low income, higher household expenses and fewer available jobs,” Mr. Alegre said.

Headline inflation rose to a 14-year high of 8% in November, from 7.7% in October. For the January-to-November period, inflation averaged 5.6%, below the BSP’s full-year forecast of 5.8%.

“In particular, consumers expected the inflation rate may rise to 5.9% for the next 12 months, breaching the upper end of the National Government’s inflation target range of 2-4% for 2022 and 2023,” the BSP said.

“Businesses expected that the peso may continue to depreciate against the US dollar and that the peso borrowing and inflation rates may continue to rise in Q4 2022, Q1 2023 and the next 12 months,” the central bank said.

The peso closed at PHP 55.56 versus the US dollar on Friday, up by 12.5 centavos from its PHP 55.685 finish on Thursday. Year to date, the peso has weakened by PHP 4.56 or 8.2% from its PHP 51 close on Dec. 31, 2021.

“Further, businesses expected that inflation may breach the upper end of the National Government’s 2–4% inflation target range for 2022–2023. In particular, firms were expecting that inflation may settle at 6.2% in Q4 2022, 6.1% for Q1 2023 and 5.9% for the next 12 months,” it added.

This quarter’s business sentiment of 23.9% fell from the 39.7% seen in the fourth quarter of 2021.

The business confidence index for the next quarter was at 31.3%, also lower from the 43.9% in the previous quarter.

Companies also grew less confident for the next 12 months, as the index decreased to 46.2% from 57.7%.

Businesses also expect access to lending would be tighter in the fourth quarter of 2022.

“Firms expected that their financial condition and access to credit would be tighter in Q4 2022 as their corresponding indices declined further,” the BSP said.

The Monetary Board has so far increased borrowing costs by 350 basis points since May to tame inflation, including its recent 50-bp hike on Thursday, bringing the key rate to 5.5%.

The central bank interviewed 5,499 consumers for the survey held Oct. 1-13, and 1,501 business owners for the survey held on Oct. 4-Nov. 22. — Keisha B. Ta-asan