Consumers expect their family income, spending to decline

By Des Ferriols
The Philippine Star 06/15/2006

Consumers expect their family income and spending to decline this year but overall economic prospects are anticipated to improve in 2007.

The latest Consumer Expectations Survey (CES) of the Bangko Sentral ng Pilipinas (BSP) indicated that although there was a slight improvement in outlook, sentiments are still pervasively negative when consumers were asked about their prospects for the third quarter of the year.

The CES is conducted by the BSP every quarter in an attempt to measure the pulse of the consuming public and anticipate their spending intentions over a period of 12 months going forward.

The survey is part of the BSP’s efforts to anticipate movements in prices of basic commodities and consumer durables and whether there would be a measurable increase or decline in consumer demand.

The BSP said in the second quarter CES report that when asked about their prospects for the third quarter of the year, more consumers saw a downturn in income and spending although not as many as the previous survey.

The so-called CES diffusion index rose in the second quarter survey but remained negative at -38.7 percent. This meant that over half of consumers surveyed by the BSP did not feel good about their prospects for the current quarter as well as the next.

However, the slight decline in the number of pessimists, according to the BSP, indicated that consumer expectations were improving although not fast enough to overcome the overall negative attitude.

The BSP said respondents attributed their better economic and financial outlook to the expected increase in income arising from better business condition; expectations of more family members working; savings in the family; and expected decrease in prices of goods.

On the whole, however, the CES results indicated that respondents’ outlook on the level of family income declined.

By income class, the CES showed that consumer sentiment in the second quarter improved across all income groups although the biggest improvement was observed in the outlook index of the high income group defined as those earning a monthly income of P30, 000 and over.

Despite the improvement, however, the diffusion index remained negative at -11.3, indicating that sentiments were predominantly negative.

The index for respondents from the lowest income level (less than P10,000) improved by 5.1 index points to but still overwhelmingly negative at -46.3 percent while the middle-income group (P10,000 - 29,999) was at -35.9 percent for the same period.

"While survey results on consumer outlook remained negative, more household respondents believed that the economic conditions would improve in the third quarter," the BSP said in the survey results, adding that the improvement was significant enough, rising 33.1 index points from the previous survey to -5.6 percent.

Respondents anticipated that their family expenditures for basic commodities in the third quarter of 2006 would decrease slightly by an average of 0.8 percent.

Contributing to this decline, the CES reported, was the reduction in family purchases of the following products and services: communication, education, hotel and restaurant, clothing and footwear, transportation, medical care, house rent, fuel, and personal care and effects.

Respondents, however, still expected their expenditures on food and electric bills to increase in the next quarter.

While respondents expected a decline in their basic expenditures, consumer sentiments on buying conditions for assets became more favorable during the current quarter compared to the previous quarter. Consistent with the improving consumer outlook and the anticipated increase in family income in the next 12 months, the CES said consumers were more keen on buying assets in the next 12 months. The CES reported that the buying intention index in the next 12 months went up by 3.7 points to 32.0 percent in the second quarter survey. This increase in purchases was expected primarily for consumer durables.

Households cited increase in income, easy installment terms, form of investment (in the case of housing), usefulness in business and convenience to family members (in the case of motor vehicle) as factors that would encourage them to buy assets.

On the other hand, majority of the respondents who indicated "not to buy" in the next 12 months cited high prices, low/insufficient income and higher priority for food and other basic needs.

 

http://www.philstar.com/philstar/NEWS200606150703.htm