Philippine Markets Newsletter

MONDAY MACRO: Consumer sentiment has dimmed in the previous quarter, but is more optimistic over the next year

February 28, 2022

As we’ve mentioned previously, businesses are optimistic about their future growth prospects given the current macroeconomic environment and their economic expectations.

Consumers, on the other hand, were not so optimistic in the previous quarter, according to this indicator. However, further looking into this indicator, we see that consumers are actually just as upbeat as businesses.

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In a previous report, we talked about how Commercial and Industrial loans are at new highs, signaling that businesses are bullish on future growth prospects following more relaxed pandemic restrictions and higher vaccination rates.

The Confidence Index (CI) for businesses is showing the same signs of optimism.

For context, the business CI is an indicator of overall business sentiment regarding growth prospects while factoring in the current economic environment.

In Q4 2021, the CI for firms shot up significantly to 39.7% from the previous quarter’s -5.6%. Apart from relaxed pandemic restrictions and continued rollout of vaccines, firms also attributed their optimism to increased demand and sales, particularly due to seasonal upticks around the holidays.

The CI data released is based on the most recent full quarter’s survey results, which means that the index isn’t all that informative about the firms’ true economic outlook—for this, we turn to another data set included in the survey.

Aside from being asked about their current sentiment at the time of the survey, respondents are also asked about their confidence over the next quarter and the next 12 months. This gives us more insight as to what to expect in the next year.

Businesses are also optimistic of future prospects over the next quarter and 12 months, as they expect possible herd immunity, massive declines in COVID-19 cases, and even more relaxed quarantine restrictions.

However, while that may be the case for businesses, consumers don’t share the same level of optimism—at least, in the previous quarter.

Similar to the business CI, consumer CI is an indicator of the Filipino consumers’ optimism towards the economy relative to their current financial situation. The data released also covers household confidence for the previous full quarter, the next quarter, and the next 12 months.

For Q4 2021, consumer sentiment decreased to -24% from the previous quarter’s -19.3%. The reason for the pessimism is due to ongoing COVID-19 cases as well as broader macroeconomic headwinds such as higher inflation and unemployment rates, and lower income.

Over the next year, however, consumers became more optimistic. Next quarter and next 12 months CI increased to 9.3% and 23.6% from 2.7% and 18.6%, respectively, as households expect more effective governance, additional employment, and increased income.

Optimistic consumers imply greater future demand, which incentivizes the creation of more businesses and jobs. On the other hand, pessimistic consumers suggest lower demand in the near-term, which becomes a headwind for growth.

Particularly, as the survey’s data concludes, consumers are likely to spend more on basic goods and services—food, healthcare, education, etc.— over the next quarter, although at a slower pace relative to data from a quarter ago. Households are also expected to reduce spending for discretionary items such as clothing, footwear, and restaurants.

Also, over the next year, consumers are more upbeat about spending on big-ticket items, real estate specifically.

Overall, barring any more black swan events, demand over the next looks to be brighter as consumers factor in more optimistic forecasts.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful.

Stay tuned for next week’s Monday Macro report!


Angelica Lim
Research Director
Philippine Markets Newsletter
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