Consumer confidence weakens for Q4 2018

Consumer outlook continued to weaken for Q4 2018, as the overall confidence index (CI) declined to -22.5 percent from -7.1 percent in Q3 2018. In particular, the current quarter CI registered the lowest reading back in Q4 2014 and posted the largest drop by 15.4 percentage points since the nationwide survey started in Q1 2007. The negative index indicates that the pessimists outnumbered the optimists for Q4 2018. 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. A positive CI indicates a favorable view, except for the inflation rate, the peso-borrowing rate, unemployment and change in prices, where a positive CI indicates the opposite. The overall consumer CI measures the average direction of change in three indicators - overall condition of the economy, household finances, and household income.

Respondents attributed their bearish outlook during the current quarter to the following: (a) higher prices of commodities, (b) low salary/income, (c) increase in household expenses, (d) no increase in income, and (e) upsurge in the number of unemployed persons. Respondents also noted the occurrence of typhoon and other calamities in Q3 2018 as reasons behind their weaker sentiment for the current quarter.

The less favorable consumer sentiment was carried to the subsequent reference periods as the next 3 months CI reverted to negative territory at -0.8 percent (from 3.8 percent in the previous quarter) while the next 12 months CI, although remaining positive, declined to 10.7 percent from 13 percent a quarter ago. Similar to the current quarter, the consumer outlook was less buoyant for the next quarter and the year ahead due to expectations of: (a) higher prices of goods, (b) low salary or income, (c) rise in expenditures, (d) no increase in income, and (e) high unemployment rate.

Consumer sentiment declines across the three indicators and across income groups for the current quarter

The quarter-on-quarter decline in confidence for Q4 2018 was observed across the three component indicators of consumer confidence with the lowest CI on the economic condition of the country, followed by family financial situation, and family income. For the next quarter and the year ahead, consumer confidence on the three component indicators weakened except on family income for the year ahead, which remained steady. Notably, the CIs for family income and family financial situation reverted to negative territory for the current quarter and the next quarter, respectively.

Consumer outlook across income groups also weakened for the current quarter. The higher prices of goods and household expenditures, low income and the high unemployment rate were the common reasons driving the weaker outlook across income groups for Q4 2018. Notably, the outlook of the low- and middle-income groups' was more pessimistic since they saw no increase in income. Meanwhile, the high-income group considered the depreciating peso as another reason for their less optimistic outlook. For the next quarter and the year ahead, the sentiment of consumers across income groups were mixed. For the near term, consumer confidence of the low-income group was more pessimistic while that of the high-income group was broadly steady. For the next 12 months, outlook of the low-income group turned pessimistic while the high-income group appeared more buoyant. Meanwhile, consumer outlook of the middle-income group was less upbeat for both periods.

Consumers' spending outlook declines for the next quarter

The spending outlook index of households on basic goods and services declined to 42.3 percent for Q1 2019 (from 45.7 percent in the previous quarter's survey results). This suggests that while more respondents continue to expect higher spending on basic goods and services, the number that said so decreased compared to a quarter ago, indicating that growth in consumer spending could slow down in the near term. Fewer respondents expected increased spending on food, non-alcoholic and alcoholic beverages, clothing and footwear, house rent and furnishing, water, electricity, fuel, communication, and restaurants and cafes.

The percentage of households that considered the current quarter as a favorable time to buy big-ticket items declined to 24.5 percent from 26.4 percent recorded a quarter ago. The less sanguine outlook on buying conditions was evident across the three big-ticket items and is attributable to: (a) the shift of respondents' spending priority on food and other basic needs (from big-ticket items), (b) high prices, and (c) low/insufficient income. Meanwhile, the percentage of those who intend to buy big-ticket items slightly decreased but remained broadly steady due largely to the steady buying intentions for real estate and weaker buying intentions for motor vehicles and consumer durables.

The percentage of households with savings rises for Q4 2018

For Q4 2018, the percentage of households with savings increased slightly to 32.8 percent from 32.5 percent in the previous quarter. According to respondents, they save money for the following reasons: (a) emergencies, (b) health and hospitalization, (c) education, (d) retirement, (e) purchase of real estate, and (f) business capital and investment. Among households with savings, more than two-thirds (68 percent) of respondents have bank deposit accounts for Q4 2018 (up from 66.2 percent in Q3 2018). Moreover, 46.2 percent kept their savings at home, while 26.5 percent put their money in cooperatives, paluwagan, other credit/loan associations, and as investment (e.g., microfinance and insurance).

The percentage of respondents who reported that they could set aside money for savings during the current quarter grew to 40.2 percent (from 37.3 percent in Q3 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 the peso to depreciate for the next 12 months. Consumers who expected inflation to go up continued to outnumber those that held the opposite view for the next 12 months but the number that said so declined from that of a quarter ago. However, respondents expected that the rate of increase in commodity prices will breach the upper end of the government's 2 to 4 percent inflation target range for 2018, at 5.1 percent, over the course of the next 12 months (slightly higher than the anticipated 5 percent in the Q3 2018 survey). More respondents expected the peso to depreciate against the US dollar than those who said otherwise but the number that said so was generally unchanged compared to a quarter ago. On the other hand, more respondents expected interest and unemployment rates to rise for the year ahead as the CI edged higher for this quarter's survey compared to a quarter ago.

OFW households that utilize their remittances for savings and investment increase for the current quarter

Of the 470 households included in the survey that received OFW remittances for Q4 2018, 98.5 percent used the remittances that they received to purchase food and other household needs. Further, the proportion of OFW households who allotted part of their remittances for education (67 percent), medical expenses (52.6 percent), savings (35.5 percent), and investment (5.1 percent) rose compared to the previous quarter's survey results. Meanwhile, a lower percentage of OFW households apportioned their remittances for purchase of appliances/consumer durables (18.7 percent), purchase of house (10.4 percent), purchase of car/motor vehicle (6.4 percent), debt payments (21.9 percent), and other miscellaneous expenses (0.4 percent) was observed.

Debt-to-income ratio of surveyed respondents rises to 43.4 percent

Almost one-third or 32.5 percent of the respondents declared that he/she and/or his/her spouse have an outstanding loan at present. The debt-to-income ratio of surveyed respondents fell to 24.3 percent for the current quarter, lower compared to the previous quarter's survey results of 43.4 percent.

About the survey

The Q4 2018 CES was conducted during the period 1 � 13 October 2018. The CES samples were drawn from the Philippine Statistics Authority (PSA) Master Sample List of Households, which is considered a representative sample of households nationwide. The CES sample households were generated using a stratified multi-stage probability sampling scheme. It has a sample size of 5,609 households, of which 2,750 (49 percent) were from NCR and 2,859 (51 percent) from AONCR.

Of the sample size, 5,411 households responded to the survey, equivalent to a response rate of 96.5 percent (from 96.9 percent in the last quarter's survey). The respondents consist of 2,645 households in NCR (with 96.2 percent response rate) and 2,766 households in AONCR (with 96.7 percent response rate). The majority of the respondents were from the middle-income group (44.4 percent) and the low-income group (36.4 percent) while 19.2 percent were from the high-income group.

Source: Bangko Sentral NG Pilipinas (BSP)