Holidays prompt slow return of confidence among consumers, firms
MANILA, Philippines — Easing coronavirus restrictions and seasonal uptick in demand ahead of Christmas season buoyed business expectations in the fourth quarter while consumers turned less pessimistic about their future.
Separate surveys by the Bangko Sentral ng Pilipinas (BSP) showed consumers and enterprises regaining some confidence in the final 3 months, going into the next quarter and year, although levels remained way below typical trend before the pandemic crushed rosy outlook.
For the fourth quarter, businesses led the slow return of confidence. The overall business confidence index jumped back to positive territory to 10.6% from -5.3% in the previous 3 months. A positive reading meant majority of the 1,513 corporations surveyed portrayed optimism toward end-2020.
Trailing behind enterprises were consumers where a separate index moderated its drop to -47.9% for fourth quarter from a historic low of -54.5% in previous 3 months. The BSP survey covered 5,437 households.
Overall however, the results of both quarterly polls were far less upbeat than usual and reflected what economic officials have repeatedly said as a “crisis in confidence” left by months of lockdowns now hampering the economy’s return to prosperity.
That said, there are signs the current rebound in confidence, albeit coming in slow, would persist into the near future. Majority of consumers and businesses are looking into the first quarter of 2021 with a positive perspective with indices at 4.3% and 37.4%, respectively.
Over the next 12 months, the metric measuring businesses’ outlook jumped to 57.7%, while that for consumers slightly eased to 23.6%, BSP surveys showed.
This is good news for the government trying to convince consumers to go out and spend and businesses to reopen in order to support economic revival. For the fourth quarter, consumers are expecting “additional and high income” plus “more jobs and permanent employment” to bring them through the yearend.
By income level, low-income earners and the middle class got less pessimistic, largely because of receiving government cash assistance for poor families and “availability of more jobs.” On the flip side, sentiment worsened for high-income earners this quarter.
Overall however, that consumers are becoming less pessimistic bodes well to businesses looking forward to “increase in sales of volumes and orders” brought by “uptick in demand during the holiday season,” the central bank said.
Not translating to spending
But after the holidays, the positive outlook may not be enough to increase consumer spending in the longer run. A subindex measuring household spending was unchanged at 26.4% for the first quarter of next year, the lowest reading on record. Worse, only a smaller portion, 11.4%, indicated plans to purchase big-ticket items like cars or property.
Businesses, on the other hand, were more optimistic, with expansion and hiring plans returning to positive territory for the first quarter of 2021 and over the next 12 months. This, even as firms are expecting difficulty in securing credit to fund their operations.
Going into 2021, easing lockdowns or even “an end in the COVID-19 pandemic” with vaccine rollout are proving to be the biggest catalyst of optimism among all respondents.
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