High inflation dampens Philippine business, consumer confidence

08, Dec. 2018

MANILA, NNA – High inflation in the Philippines continues to dampen confidence among business people and consumers in the final quarter of 2018 and into the new year, central bank surveys released Thursday show.

Despite the holiday season, companies were more cautious in the October-December quarter, with the bank’s key index falling to 27.2 from 30.1 in July-September, hitting the lowest level since January-March 2010, according to the Bangko Sentral ng Pilipinas.

“This means the number of optimists declined, but continued to be greater than the number of pessimists during the quarter,” the central bank said.

Inflation remains high in the Philippines, driven by rising raw material costs and the weaker peso, which makes imports more expensive. Confidence also dipped in the face of high interest rates as well as lower sales and orders.

The business outlook index showing respondents’ projections for 2019 slumped to a nine-year low of 29.4 from 42.6 three months earlier

The bank’s consumer confidence index in the fourth quarter tumbled to a four-year low of -22.5 from -7.1 in the third quarter, due to rising commodity prices, lower incomes and higher unemployment.

The index gauging consumer sentiment over the next 12 months fell to 10.7 from 13 in the previous quarter for the same reasons.

Both business people and consumers expect commodity prices to rise at a faster pace, the peso to depreciate, and interest rates to rise further in the current and coming quarter.

The business survey was conducted from Oct. 1 to Nov. 23 and the consumer survey from Oct. 1 to Oct. 13, when the rate of increase in consumer prices was at its recent peak and the peso was weak.

Data released later showed inflation eased to 6 percent in October from 6.7 percent in September, the peso firmed, and unemployment fell.