Consumer confidence backs strong macroeconomic fundamentals

MANILA–The overall consumer confidence index (CI) continued to improve for the second consecutive quarter, climbing to -8.5 percent in Q4 2010 from -14.0 percent in Q3 2010.

This was the highest reading recorded since the nationwide Consumer Expectations Survey started in 2007.

The sustained rise in consumer confidence was supported by the better-than-expected GDP growth for the first three quarters of the year at 7.5 percent, which exceeds the full year government forecast of 5-6 percent.

However, the confidence index for Q4 2010 stayed in the negative territory as the pessimists outnumbered the optimists, especially those in the low-income group who attributed their unfavorable sentiment to lack of employment and insufficient income.

For the next quarter and the year ahead, consumer sentiments were less upbeat as the CIs declined compared to their quarter-ago levels, to 11.9 percent (from 15.3 percent) and 25.9 percent (from 33.4 percent), respectively.

However, the next quarter- and the next 12 month-CIs remained positive at double-digit levels for the second time in a row, suggesting that respondents expected sustained although slower economic growth in 2011.

Their expectations could be due to seasonally lower consumer demand in the first quarter of the year and the strong headwinds coming from the weaknesses of the European and American economies.

Consumer optimism on the economic condition of the country, family income and family financial situation were at record highs, indicating that respondents expect increased family income and finances from a broad-based and more inclusive growth of the economy.

Reflecting the overall consumer outlook in the near term and the year ahead, consumer confidence across all three indicators for the next quarter and the next 12 months remained positive at double digit levels, but were also less favorable compared to the previous quarter’s survey results.

Positive consumer sentiments

For the current quarter, consumer sentiments across all income groups (high, middle, and low) climbed to their highest levels in Q4 2010.

The outlook remained positive for all income brackets in the near term and the year ahead. Consumer confidence was stronger for the high-income respondents but weaker for those in the middle- and low-income levels.


More households expected that their expenditures on basic goods and services would go up in Q1 2011. Increased expenditures were particularly expected in food, electricity, fuel, personal care and effects, and transportation, indicating that appreciable inflationary pressures could come from these goods and services.

Buying conditions for consumer durables and motor vehicles improve while those for housing are less favorable.

The percentage of households that considered the current quarter as a favorable time to buy big-ticket items declined marginally relative to a quarter ago due largely to the decline in the buying conditions for housing in both NCR and AONCR.

Buying intentions

The buying intentions of consumers improved for the next 12 months. In particular, buying intentions in both NCR and AONCR for consumer durables and motor vehicles improved, offsetting the decline in buying intentions for housing.

Outlook for the next 12 months

Consumers anticipated that the peso would continue to appreciate against the US dollar in the year ahead, in line with expectations of continued strong inflows of foreign exchange, particularly from overseas Filipinos’ remittances. Inflation and interest rates were also expected to rise.

Respondents expected inflation to increase to 7.6 percent over the course of the next 12 months (from 5.7 percent in the last quarter’s survey).

The inflation outlook of consumers could be attributed to the expected acceleration of fuel prices, which they expect would pull up the prices of basic goods in the next 12 months.

More consumers expected unemployment rate to rise, consistent with their expectation of a possible slowdown of the economy in the year ahead.

OFW expenditures

Similar to the previous survey results, the bulk of OFW households (96.7 percent) used remittances for food.

More than 70 percent of the households (72.6 percent) allocated their remittances for education, 61.1 percent for medical payments, and 49.8 percent for debt payments.

The percentage of OFW households that utilized their remittances to savings climbed to 43.7 percent (from 43.0 percent in Q3 2010 and from only 7.2 percent in Q1 2007).

Meanwhile, the percentage that apportioned part of their remittances to purchase consumer durables, houses and lots, and motor vehicles declined compared to the previous quarter’s result.

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