After three consecutive quarters of optimistic outlook, business sentiment has turned negative in the third quarter in contrast to an improving consumer confidence, according to surveys by the Bangko Sentral ng Pilipinas (BSP).

Based on the BSP’s latest Business Expectations Survey (BES), the current quarter outlook of firms have turned pessimistic with the reimposition of stricter lockdowns. In contrast, the Consumers Expectations Survey (CES) showed consumers are “less pessimistic” because jobs have continued despite mobility restrictions.

BSP Senior Director Redentor Paolo Alegre Jr. of the Department of Economic Statistics, who presented the surveys on Friday, Sept. 24, said that in a nutshell business sentiment has turned bleak while consumers’ views improved.

“Business sentiments are deteriorating while consumer outlook are improving,” he said. Sentiments, however, showed some improvements for the fourth quarter and in the next 12 months.

After three quarters of optimistic sentiment, the overall BES confidence index (CI) dropped to -5.6 percent in the third quarter from 1.4 percent in the second quarter.

The pessimistic views were due to: the ongoing COVID-19 pandemic and its protracted adverse effects to their businesses; re-imposition of Enhanced Community Quarantine particularly in Metro Manila; decrease in sales, orders, and income; concerns over government policies, particularly the actions to curb the spread of COVID-19 and its Delta variant; and higher prices of raw materials such as steel, wood liner, glue, and other commodities.

Generally, Alegre said the business sentiment across all sectors have deteriorated, such as construction, wholesale and retail trade as well as services sector. Business operations have negative outlook in terms of business activity and total orders booked. It is the same sentiment for the fourth quarter, however the sentiment improves for the next 12 months on account of the improved outlook of the industry, construction and services sectors.

In terms of financial conditions or credit, and employment outlook, the BES showed firms expect tighter credit in the third quarter while employment is more optimistic despite that fewer firms have expansion plans for the last quarter of 2021 and in the next 12 months.

Both businesses and consumers expect a weaker peso and higher peso borrowing rates as well as inflation rate in the the third quarter and for the near term.

For the BES results in particular, businesses project the peso to depreciate vis-à-vis the US dollar in the fourth quarter and in the next 12 months.

Alegre, however, said business sentiment is still positive for the fourth quarter and “more optimistic for the next 12 months” since firms are looking forward to hiring people in 2022.

Alegre said business sentiment will regain its optimism in the fourth quarter as the overall CI increased slightly to 31.9 percent from 31.4 percent a quarter ago. For the next 12 months, business sentiment was more optimistic with a CI of 56 percent from previous quarter’s 52.5 percent.

Trading firms such as exporters and importers and even those domestic-oriented are less confident but expect improvement in their outlook for the near term. The fourth quarter should bring more business and their sentiments are more optimistic but exporters are “less buoyant,” said the BSP. For the next 12 months, the outlook for trading firms are relatively steady.

As for consumers, they also expect interest and unemployment rates to increase and inflation rate to remain within the government target range of two-four percent. “Households anticipated that the rate of increase in commodity prices will remain within the government’s inflation target range of two-four percent for 2021— at 3.4 percent for the next 12 months,” said the BSP. Consumers anticipate that interest rates may also increase in the fourth quarter and in the next 12 months.

The indicators of consumer confidence come from the country’s economic condition, family’s financial situation, and family income. Based on the latest CES results, the CI was less negative at -19.3 percent from -30.9 percent in the second quarter. The BSP said the consumer outlook has been improving steadily since the third quarter 2020.

The improved outlook was due to the following: availability of more jobs and more working family members; additional/higher income; and effective government policies and programs, particularly in addressing COVID-19-related concerns, such as the availability and rollout of vaccines, provision of financial assistance, and easing of quarantine restrictions.

The CES showed consumer sentiments have improved for the fourth quarter with a CI of 2.7 percent from 1.3 percent in the previous survey. But, the outlook for the next 12 months was less optimistic as the CI declined to 18.6 percent from 19.8 percent, said the BSP.

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Still, consumers’ optimism are based on the following: availability of more jobs, additional and high income; effective government policies and programs; and stable prices of commodities.

The CES said consumers believe their spending habit will improve in the fourth quarter because households’ spending outlook on goods and services was more upbeat. Buying sentiment and buying intentions over the next 12 months for big-ticket items are “more buoyant”, said the BSP.

However, the CES said there were less households that said they have savings accounts in the third quarter. The percentage of households with savings accounts in banks decreased to 17 percent in the current quarter from 19.4 percent in the second quarter.

Also, the CES showed that about one in every five households availed of a loan in the last 12 months. “However, the respondents who found it difficult to apply for a loan cited the following concerns: too many requirements, long processing time, and difficulty of finding willing lender,” said the BSP.

The CES was conducted July 1 to 14 and included 5,670 households in the survey.

The BES, in the meantime, was conducted July 22 to September 15. About 1,511 firms were surveyed nationwide, of which 584 companies are in the NCR and 927 firms are located outside of the NCR.