The Bangko Sentral ng Pilipinas’ latest consumer confidence survey, conducted from October 1 to 13, revealed that the outlook of consumers turned more pessimistic in 4Q 2022. The same survey showed that this view extends to 1Q 2023 and over the next 12 months.<\/p>\n\n\n\n
Sentiment showed that the overall confidence index (CI) decreased to -14.6% from -12.9% in 3Q 2022. However, sentiment across the three component indictors of consumer confidence \u2013 the country\u2019s economic condition, family\u2019s financial situation and steadiness of family income \u2013 was mixed.<\/p>\n\n\n\n
Participants were more pessimistic for the country\u2019s economic condition, less pessimistic for the family\u2019s financial situation and steady for family income vs. the previous quarter. Sentiment was also mixed across income groups. Consumers from the low-income group were less pessimistic, while consumers from the high-income group were more pessimistic while the middle-income group\u2019s pessimism was steady vs. the previous quarter.<\/p>\n\n\n\n
The latest survey on business sentiment showed that businessmen were less optimistic in 4Q 2022 with the overall CI dropping for the second consecutive quarter to 23.9% from 26.1% in 3Q22. Outlook was also less upbeat as the overall index fell to 31.3% from 43.9% in 3Q22.<\/p>\n\n\n\n
For the next 12 months, business confidence was weaker, as the confidence index decreased for the third consecutive quarter to 46.2% from the previous quarter\u2019s 57.7%. Weaker sentiment was attributed to concerns on higher inflation, a weaker Peso, expectations of declining sales and demand, higher costs of production inputs and higher interest rates. Meanwhile, the average capacity utilization of the industry and construction sectors inched down to 72.1% from 72.7% in 3Q22. Among the sectors, the services sector had the most pessimistic outlook.<\/p>\n\n\n\n
In the first nine months of the year, demand was driven by revenge spending, as families returned to life pre-pandemic. However, given current market conditions, declining consumer confidence dampens next year\u2019s outlook.<\/p>\n\n\n\n
The consumer confidence and business confidence indices are accurate leading indicators of future economic activity. The latest consumer survey’s pessimistic numbers towards 4Q22 and 2023 reveal that Filipinos may start consuming less and saving more. We expect momentum to taper off, as high interest rates lead to less borrowing and spending power. Business activity may also slowdown as the higher cost of debt will delay any expansion plans.<\/p>\n\n\n\n
Recent economic numbers have been spectacular, prompting high expectations for the remaining portion of 2022 and 2023. As such, investors may have to temper expectations and be prepared to act when disappointment kicks in. Share prices and 2023 index targets are based very optimistic economic assumptions.<\/p>\n\n\n\n