Consumer Confidence Remains Optimistic for Q1 2020

04.16.2020

Consumer sentiment sustained positive sentiment for Q1 2020, but less optimistic for Q2 2020 and the next 12 months¹

The country's consumer outlook remained positive for Q1 2020, even as the overall confidence index (CI) remained positive although marginally lower at 1.26 percent from 1.31 percent for Q4 2019.

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.

Respondents attributed their sustained positive sentiment for Q1 2020 to the following: (a) availability of more jobs, (b) effective government policies and programs, particularly the anti-drug campaign and the Senior Citizens Act, and (c) good governance. However, their positive sentiment was mitigated by their concerns on: (a) faster increase in the prices of goods, (b) low income, (c) occurrence of typhoon, volcanic eruption, and the coronavirus disease 2019 (COVID-19) outbreak, and (d) higher household expenses.

For Q2 2020 and the next 12 months, consumers were less buoyant as the CIs declined, though remaining positive, at 9.2 percent (from the Q4 2019 survey result of 15.7 percent for Q1 2020) and 19.9 percent (from the Q4 2019 survey result of 26.4 percent for the next 12 months), respectively. Consumers cited anew their anticipation of: (a) faster increase in the prices of goods, (b) low or no increase in income, (c) aforementioned natural calamities and virus outbreak, and (d) higher household expenses as reasons for their less upbeat outlook for Q2 2020 and the next 12 months.

Consumer confidence across three component indicators is mixed for Q1 2020

For Q1 2020, consumer sentiment on the three component indicators was mixed as the outlook on the family's financial situation turned optimistic, steady on family income, and less positive on the country's economic condition compared to the Q4 2019 survey results. Meanwhile, for Q2 2020 and the next 12 months, consumer sentiment across component indicators was less favorable compared to the Q4 2019 survey results.

Consumer outlook improves for the low-income group but less buoyant for the middle- and high-income groups for Q1 2020

By income group, the steady overall CI for Q1 2020 stemmed from the less pessimistic outlook of the low-income group and the less buoyant sentiment of the middle and high-income groups. In particular, the low-income group cited expectations of improvement in peace and order situation and better road infrastructure as reasons for their more favorable outlook. Conversely, the less optimistic sentiment of the middle- and high-income groups was due to the following: (a) faster increase in the prices of goods, (b) low income, (c) higher household expenses, and (d) typhoon and other natural calamities.

For Q2 2020 and the next 12 months, the sentiment of consumers across income groups was generally less upbeat compared to the Q4 2019 survey results.

Consumers' spending outlook declines for Q2 2020
The country's spending outlook index of households on basic goods and services declined to 33.3 percent for Q2 2020 from the Q4 2019 survey result of 37.1 percent, indicating that growth in consumer spending may slow in the next 3 months.

The country's spending outlook index of households on basic goods and services declined to 3.3 percent for Q2 2020 from the Q4 2019 survey result of 37.1 percent for Q1 2020, indicating that growth in consumer spending may slow in the next 3 months. This suggests that while more respondents continued to expect higher spending on basic goods and services, the number that said so decreased compared to the Q4 2019 survey result for Q1 2020. Across commodity groups, households' spending outlook was mixed. Fewer respondents expected higher spending on: electricity; food, non-alcoholic and alcoholic beverages, and tobacco; fuel; personal care and effects; transportation; education, recreation and culture; clothing and footwear; restaurants and cafes; and communication. Meanwhile, more respondents expected an increase in expenditures on medical care, but steady for water, house rent, and furnishing.

The percentage of households in the entire country that considered Q1 2020 as a favorable time to buy big-ticket items declined to 24.2 percent from 27.2 percent recorded in Q4 2019. The less bullish outlook on buying sentiment was evident across the three big-ticket items, namely, consumer durables, motor vehicles, and house and lot. Respondents' waning buying sentiment was attributable to: (a) low/insufficient income, (b) current acquisition of consumer durables, and (c) the shift of spending priority on food and other basic needs (from big-ticket items). Further, the percentage of households in the entire country that considered the next 12 months as a favorable time to buy big-ticket items declined to 6.5 percent from 9.8 percent recorded in Q4 2019.

The percentage of households with savings for Q1 2020 rises to an all-time high

For Q1 2020, the percentage of households with savings at present reached an all-time high, since Q1 2013, at 37.8 percent, from 36.3 percent in Q4 2019. The higher number of savers was due to the increase in the number of households with savings in the middle-income group, which more than offset the decrease in the number of savers in the high- and low-income groups. According to respondents, they saved 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 percent of savers that kept their money in different types of savings institutions climbed to record highs for Q1 2020, 73.9 percent in banks, 60.2 percent at home, and 50.9 percent in cooperatives, paluwagan, other credit/loan associations, or in investments. When asked if the household would set aside money for savings in Q1 2020, the percentage of respondents that said so was lower at 41.8 percent compared to 45.4 percent in Q4 2019.

Consumers expect inflation, interest, and unemployment rates to increase and exchange rate to depreciate in Q1 2020

The survey results showed that consumers anticipated the interest rates to increase and the peso to depreciate for Q1 2020, Q2 2020, and the next 12 months. Meanwhile, respondents expected the unemployment rate to rise for Q1 2020 and Q2 2020, but to decline over the next 12 months. Households predicted that the rate of increase in commodity prices will remain within the government's 2 to 4 percent inflation target range for 2020 and 2021 at 2.2 percent for Q1 2020, 2.3 percent for Q2 2020, and 2.6 percent for the next 12 months.

OFW households that utilize their remittances for savings and investments increase for Q1 2020

Of the 494 households included in the survey that received OFW remittances for Q1 2020, 93.9 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 education (66.8 percent), medical expenses (51 percent), savings (44.7 percent), purchase of consumer durables (23.3 percent) and house (13.6 percent), and investments (6.1 percent) increased compared to the Q4 2019 survey results. Meanwhile, the proportion of OFW households that allotted part of their remittances for debt payments (17.2 percent) and purchase of motor vehicles (5.9 percent) decreased compared to the Q4 2019 survey results.

About 1 in every 3 of households availed of a loan in the last 12 months, of which 89 percent experienced ease in debt application

About 1 in every 3 households or 30.2 percent reported that they availed of a loan in the last 12 months. With regard to the access to loan, 89 percent of the respondents found it easy to apply for a loan, while others found it hard due to the following concerns: (a) numerous requirements or difficulty in accomplishing requirements, (b) limited number of loan providers, and (c) long processing.

About 1 in every 10 respondents or 10.1 percent expressed intention of applying for a loan in Q2 2020 and perceived that access to credit will be easy. Similarly, 9.8 percent of the surveyed households reported that they would borrow funds in the next 12 months, of which 92 percent thought that their credit application would be easy.

About the survey

The Q1 2020 CES was conducted during the period 29 January - 10 February 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 Q1 2020 CES, 5,555 households were surveyed. Of the said households, 2,770 (49.9 percent) were from NCR and 2,785 (50.1 percent) from AONCR.

Of the said sample size, 5,406 households responded to the survey, equivalent to a response rate of 97.3 percent (from 96 percent in Q4 2019). The respondents consist of 2,722 households in NCR (with 98.3 percent response rate) and 2,684 households in AONCR (with 96.4 percent response rate). The majority of the respondents were from the middle-income group (40.8 percent), followed by the high-income group (29.9 percent) and the low-income group (29.2 percent).

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¹ The next 12 months covers the period February 2020 to January 2021.

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