Consumer Confidence Turns Pessimistic for Q3 and Q4 2020; More Optimistic for the Next 12 Months

Consumer sentiment falls to a record low for Q3 2020, continues to be pessimistic for Q4 2020, but turns optimistic for the next 12 months 1

The country’s consumer outlook turned pessimistic for Q3 2020 as the overall confidence index (CI) fell to a record low of -54.5 percent since the start of the nationwide survey in Q1 2007.2  Respondents attributed their negative sentiment for Q3 2020 generally to the COVID-19 pandemic. Other reasons cited by the respondents were the following: (a) high unemployment rate and less working family members, (b) low and reduced income, and (c) faster increase in the prices of goods.

Consumer pessimism continued for Q4 2020 as the CI moved into negative territory at -4.1 percent from the Q1 2020 survey result of 9.2 percent for Q2 2020. Apart from concerns over the COVID-19, consumers also cited anticipation of: (a) high unemployment rate, (b) low, reduced, and no increase in income, and (c) faster increase in the prices of goods as reasons behind their pessimistic outlook for Q4 2020.

Meanwhile, consumers were more optimistic for the next 12 months as the CI increased to 25.5 percent from the Q1 2020 survey result of 19.9 percent for the next 12 months. The consumer outlook was more upbeat for the next 12 months due to expectations of an end in the COVID-19 pandemic or return to normal as well as the consumers’ anticipation of the following: (a) availability of more jobs, (b) additional or high income, and (c) stable prices of goods.

Consumer confidence across three component indicators declines for Q3 2020

For Q3 2020, consumer sentiment on the three indicators turned pessimistic compared with the Q1 2020 survey results. The CIs on the family’s financial situation and family income registered all-time lows since Q1 2007. Likewise, for Q4 2020, consumer sentiment across indicators weakened compared with the outturn in the previous survey round, particularly on the economic condition and family financial situation, where CIs reverted into the negative territory. Meanwhile, consumer confidence for the next 12 months across component indicators was more favorable compared with the Q1 2020 survey results.

Record-low CIs are registered across income groups for Q3 2020

By income group, the negative all-time low overall CI for Q3 2020 was reflected across income groups, with the low-income group reporting the lowest CI, followed by middle- and high-income groups.  Aside from the reasons cited by the consumers’ negative outlook for Q3 2020, consumer confidence for the middle-income group turned pessimistic due to expectations of higher household expenses. For Q4 2020, the sentiment of consumers across income groups turned pessimistic, but improved for the next 12 months, compared with the Q1 2020 survey results.

Consumers’ spending outlook for Q4 2020 hits record low

The households’ spending outlook index on basic goods and services declined to 26.4 percent for Q4 2020, the lowest CI recorded since Q1 2007, indicating a contraction in consumer spending in the next 3 months.

Buying sentiment for big-ticket items are less upbeat for Q3 2020 and over the next 12 months

The percentage of households in the country that considered Q3 2020 as a favorable time to buy big-ticket items (i.e., consumer durables, motor vehicles, and house and lot) declined to 12.8 percent, almost half of the 24.2 percent recorded in Q1 2020. Further, the percentage of households in the country that considered the next 12 months as a favorable time to buy big-ticket items also declined to 4.5 percent from 6.5 percent recorded in Q1 2020.

The percentage of households with savings for Q3 2020 declines

For Q3 2020, the percentage of households with savings declined to 24.7 percent from 37.8 percent in Q1 2020. The decrease in the number of savers can be seen across income groups, particularly in the middle- and high-income groups, which registered all-time lows since Q1 2007.

Among the households with savings, the majority or 71.1 percent of savers kept their money in a bank for Q3 2020, though this percentage was lower compared with 73.9 percent in Q1 2020. Meanwhile, 61.8 percent kept their savings at home and 48.9 percent considered other institutions such as cooperatives, paluwagan, other credit/loan associations, or in investments.

Consumers expect inflation, interest and unemployment rates to increase, and the exchange rate to appreciate for Q3 2020; Inflation to remain within target at 2 to 4 percent

The survey results showed that consumers anticipated the interest rates to increase, and the peso to appreciate for Q3 2020, in the next quarter and in the next 12 months. Respondents also expected that unemployment rate would rise for Q3 2020 and Q4 2020, but would decline over the next 12 months. Households anticipated that the rate of increase in commodity prices will remain within the government’s inflation target range of 2 to 4 percent for 2020 and 2021—at 2.5 percent for Q3 2020, 2.6 percent for Q4 2020, and 2.8 percent for the next 12 months.

The number of OFW households that utilize their remittances for the purchase of food and other household needs increases for Q3 2020

For Q3 2020, 97.2 percent of the 326 OFW households (from 93.9 percent in Q1 2020) indicated that remittance proceeds are used to purchase food and other household needs. Further, the percentage of OFW households that apportioned their remittances for debt payments (18.4 percent) and investment (6.4 percent) were higher compared with the Q1 2020 survey results. Meanwhile, the proportion of OFW households that allotted part of their remittances for education (60.1 percent), medical expenses (49.4 percent), purchases of consumer durables (16.9 percent), houses (7.1 percent), motor vehicles (2.8 percent) and savings (31.6 percent) declined. The latter registered the biggest decline among these types of remittance use, when compared with the Q1 2020 survey results.

About 1 in every 3 of households availed of a loan in the last 12 months, of which 87.3 percent experienced ease in debt application

For Q3 2020, about 1 in every 3 households, or 29 percent, reported that they availed of a loan in the last 12 months. On credit access, 87.3 percent of the respondents found it easy to apply for a loan. However, the remaining 12.7 percent found it difficult due to the following concerns: (a) numerous requirements, (b) difficulty locating individual money lenders, and (c) COVID-19 pandemic.

About the survey

The Q3 2020 CES was conducted during the period 1 – 14 July 2020 2020. The CES samples were drawn from the Philippine Statistics Authority’s (PSA) Master Sample of Households, which is considered as a representative sample of households nationwide. The CES sample households were generated using a stratified multi-stage probability sampling scheme. For the Q3 2020 CES, 5,563 households were surveyed. Of the said households, 2,835 (51 percent) were from NCR and 2,728 (49 percent) from AONCR.

Of the said sample size, 5,441 households responded to the survey, equivalent to a response rate of 97.8 percent (from 97.3 percent in the Q1 2020 survey). The respondents consist of 2,780 households in NCR (with 98.1 percent response rate) and 2,661 households in AONCR (with 97.5 percent response rate). Most of the respondents were from the low-income group (38.1 percent), followed by the middle-income group (37.1 percent) and the high-income group (24.8 percent).

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1  The next 12 months covers the period August 2020 to July 2021.
2  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 represents the composite measure of change in three indicators—overall condition of the economy, household finances, and household income.

 

Source: Bangko Sentral ng Pilipinas (BSP)