Philippine business optimism fell to a four-year low in the third quarter of the year, driven by slack in demand and global headwinds, even as consumer pessimism eased to its most improved level in over two years due to new income streams.

Based on the Bangko Sentral ng Pilipinas’ (BSP) latest Business Expectations Survey (BES), domestic businesses showed a darker outlook for the Philippine economy in the July-to-September period.

This is reflected in the overall business confidence index (CI) of 23.2 percent during the quarter, down from 28.8 percent in the second quarter. This was the lowest confidence level since the third quarter of 2021, which swung to a pessimism level of 5.6 percent.

A positive index indicates that more respondents are optimistic, while a negative index indicates that more are pessimistic.

“Their dampened confidence was primarily attributed to the slack in demand during the ‘ghost month’ and the onset of the rainy and typhoon season,” the BSP said in a statement released on Friday, Sept. 26.

During the “ghost month,” many individuals typically delay major decisions, such as starting a business, entering into partnerships, or making investments.

“Global headwinds, such as higher US [United States] tariffs, geopolitical tensions, and weaker foreign demand, also weighed on business confidence,” the BSP said.

Consumer sentiment, meanwhile, showed the most improvement in two years, as pessimism eased to -9.8 percent in the third quarter from -14 percent in the previous quarter. It was the most improved level in over two years since the third quarter of 2023 at -9.6 percent.

According to the central bank, Filipino consumers were less pessimistic during the period because of “new income sources, higher earnings, and more working family members.”

For both the next quarter and the next 12 months, consumers are expected to maintain a less downbeat sentiment. This easing pessimism reflects “stronger consumer confidence in the near term,” the BSP said.

Over the next year, consumers anticipate that goods prices will accelerate at a rate within the government’s target range of two to four percent. “Within-target inflation supports investments and job creation,” the central bank said.

Business confidence climbed to 49.5 percent for the next quarter but eased to 48.1 percent for the year ahead. Despite weaker optimism in the succeeding periods, a still-positive index shows “businesses’ continued optimism about near-term economic prospects.”

Firms also expect inflation over the next year to remain within the government’s target band.