Consumer Confidence Weakens but Remains Optimistic for Q4 2019

Consumer sentiment weakens for Q4 2019, steady for Q1 2020, and less optimistic for the next 12 months1

The country's consumer outlook weakened but remained optimistic for Q4 2019 as the overall confidence index (CI) decreased to 1.3 percent from 4.6 percent in Q3 2019. According to respondents, their less favorable outlook for Q4 2019 was due to the following concerns: (a) higher prices of commodities, (b) low or no increase in salary/income, (c) increase in household expenses, and (d) high unemployment rate.

The lower but still positive CI was reflective of the combined decline in the percentage of optimists and increase in the percentage of pessimists compared to Q3 2019 survey results. 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.

For Q1 2020, consumer sentiment remained steady as the CI showed only a 0.1 percentage point (ppt) decline to 15.7 percent from the Q3 2019 survey result of 15.8 percent for Q4 2019.

Meanwhile, consumer outlook for the next 12 months was less optimistic as the CI decreased to 26.4 percent from the Q3 2019 survey result of 29.8 percent for the next 12 months. Similar to Q4 2019, the lower CI for Q1 2020 and the next 12 months stemmed from households' anticipation of: (a) higher prices of commodities, (b) no or low increase in salary/income, (c) high unemployment rate, and (d) increase in household expenses.

Consumer sentiment weakens for all the three component indicators and across all income groups for Q4 2019

A decline in the quarter-on-quarter consumer sentiment was observed for Q4 2019 across the three component indicators of consumer confidence, namely, the country's economic condition, family financial situation, and family income. Meanwhile, for Q1 2020, consumer sentiment across component indicators was generally steady compared to Q3 2019 survey results.

For the next 12 months, respondents' outlook on economic condition of the country and family financial situation was less favorable, while family income remained broadly steady compared to Q3 2019 survey results.

Consumer outlook across income groups weakened for Q4 2019 led by the middle-income group with the highest drop in the quarter-on-quarter CI, followed by the high- and low-income groups. Aside from the reasons cited by the consumers' less optimistic outlook for Q4 2019, the consumer confidence for high-income group, in particular, was less favorable due to expectations of peace and order challenges. For Q1 2020, the sentiment of consumers across income groups was mixed. Consumer confidence of the high-income group was broadly steady, low-income group was less optimistic, while that of the middle-income group was more upbeat.

The consumer sentiment for the next 12 months was less buoyant across income groups compared to Q3 2019 survey results.

Consumers' spending outlook for Q1 2020 is broadly steady

The country's spending outlook index of households on basic goods and services was broadly steady at 37.1 percent for Q1 2020 from the Q3 2019 survey result of 36.2 percent for Q4 2019. This indicates that respondents who expect to spend more on goods and services outnumbered those who said otherwise, but the number that said so remained generally unchanged compared to Q3 2019 survey result for Q4 2019. Meanwhile, households' spending outlook across commodity groups was mixed. The spending outlook was broadly steady for food, non-alcoholic and alcoholic beverages and tobacco, fuel, and personal care and effects. More respondents expected an acceleration of expenditures on transportation, education, recreation and culture, clothing and footwear, medical care, communication, restaurant and cafes, and house rent and furnishing, while fewer respondents anticipated higher spending on electricity and water.

The percentage of households in the entire country that considered Q4 2019 as a favorable time to buy big-ticket items declined to 27.2 percent from 28.9 percent recorded in Q3 2019. The less sanguine outlook on buying conditions was evident across the three big-ticket items, namely, consumer durables, motor vehicles, and house and lot. Respondents' waning buying condition was attributable to: (a) the shift of spending priority on food and other basic needs (from big-ticket items), (b) high prices of big-ticket items, and (c) low/insufficient income. Likewise, the percentage of those who intend to buy big-ticket items for the next 12 months decreased across the three big-ticket items.

The percentage of households with savings declines for Q4 2019

For Q4 2019, the percentage of households with savings at present went down to 36.3 percent from an all-time high of 37.5 percent in Q3 2019. The lower number of savers was due to the decline in the number of households with savings in high- and middle-income groups, which dominated the marginal increase of savers in the low-income group. According to respondents, they save money for the following reasons: (a) emergencies, (b) health and hospitalization, (c) education, (d) retirement, (e) business capital and investment and (f) purchase of real estate.

Among households with savings, the majority or 69.6 percent of savers kept their money in a bank for Q4 2019, higher compared to 66.9 percent in Q3 2019. When asked if the household would set aside money for savings during the Q4 2019, the increase in the percentage of respondents that said so was minimal at 0.1 ppt, compared to 45.3 percent in Q3 2019.

Consumers expect inflation, interest, and unemployment rates to increase and exchange rate to depreciate for the next 12 months

The survey results showed that consumers anticipated inflation, interest and unemployment rates to increase and the peso to depreciate for the next 12 months. The number of consumers with views that inflation will go up continued to outnumber those that held the opposite view for the next 12 months, but the number that said so declined from Q3 2019 survey results. Moreover, respondents anticipated the rate of increase in commodity prices to be within the government's 2 to 4 percent inflation target range for 2019, at 3.9 percent over the course of the next 12 months (lower than the Q3 2019 survey result of 4.3 percent for the next 12 months). Meanwhile, fewer respondents expected interest rates to increase compared to Q3 2019 survey results. On the other hand, more households anticipated the peso to depreciate and the unemployment rate to increase, compared to Q3 2019 survey results.

OFW households that utilize their remittances for savings increase while those for investment decrease for Q4 2019

Of the 473 households included in the survey that received OFW remittances for Q4 2019, 97.3 percent used the remittances that they received to purchase food and other household needs. Further, the percentage of OFW households that apportioned their remittances for savings (38.5 percent) as well as purchase of consumer durables (20.7 percent) and motor vehicles (9.3 percent) increased compared to Q3 2019 survey results. Meanwhile, the proportion of OFW households that allotted part of their remittances for education (64.5 percent), medical expenses (44.6 percent), debt payments (20.1 percent), purchase of house (9.3 percent), and investment (5.1 percent) decreased compared to Q3 2019 survey results.

Debt-to-income ratio of surveyed respondents registers an all-time low of 9.2 percent for Q4 2019

About 1 in 4 households or 26.3 percent of the respondents reported that he/she and/or his/her spouse have an outstanding loan, the lowest percentage since Q2 2018. The monthly amortization of debt per capita (respondents including spouse/partner) for Q4 2019 declined to ?2,941 from ?4,248, while the monthly income per capita for Q4 2019 increased to ?31,952 from ?28,243, compared to Q3 2019 survey results. This translates to an all-time low of 9.2 percent debt-to-income ratio of surveyed respondents from 15 percent in Q3 2019.

About the survey

The Q4 2019 CES was conducted during the period 1 � 12 October 2019. 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. For the Q4 2019 CES, 5,648 households were surveyed. Of the said households, 2,842 (50.3 percent) were from NCR and 2,806 (49.7 percent) from AONCR.

Of the said sample size, 5,421 households responded to the survey, equivalent to a response rate of 96 percent, (from 96.7 percent in Q3 2019). The respondents consist of 2,730 households in NCR (with 96.1 percent response rate) and 2,691 households in AONCR (with 95.9 percent response rate). The majority of the respondents were from the middle-income group (44.6 percent), followed by the low-income group (30.6 percent) and the high-income group (24.8 percent).

Source: Bangko Sentral ng Pilipinas (BSP)