Holidays, elections and APEC cited by respondents in BSP survey
Businesses are more upbeat with regard to prospects for the last three months of the year, the Bangko Sentral ng Pilipinas (BSP) said on Friday, with a quarterly confidence index rising to a two-year high.
Seasonal factors such as the yearend holidays and election-related spending were said to have boosted the overall business confidence index (CI) to 51.3 percent for the October-December period from 41.4 percent in the third quarter.
Expectations were also driven by hopes of increased business during the Asia Pacific Economic Cooperation (APEC) Summit, results of the central bank’s Q4 2015 Business Expectations Survey (BES) showed.
The BES, which polled 1,514 firms nationwide, was conducted between October 1 and November 16, just before Manila hosted the APEC Leaders’ Meeting. Results of the quarterly survey are viewed by the central bank, among others, as an advance indicator of the direction of change in overall business activity.
The CI is computed as the percentage of firms that answered in the affirmative less the percentage of those that replied in the negative with respect to a given indicator.
The result for the current quarter is the highest since the 52.3 percent recorded in the fourth quarter of 2013, the central bank said.
Respondents cited the following factors for their more optimistic Q4 outlook:
• an increase in consumer demand during the Christmas, main palay harvest and milling seasons;
• sustained growth in sales, orders and projects that will lead to increased production;
• business expansion and new product lines;
• new and enhanced business strategies and processes;
• steady inflows of overseas Filipinos’ remittances, especially during the holidays; and
• election-related spending in the run-up to next year’s national elections.
Rosabel Guerrero, director of the central bank’s Department of Economic Statistics, said domestic sentiment also reflected buoyant business outlooks in Australia, Japan, and the euro area but was in contrast to weaker sentiment in the United States, the United Kingdom, China, Hong Kong, Germany, Russia, Indonesia, Singapore and India.
Higher disbursements for the government’s infrastructure and other development projects, along with favorable macroeconomic conditions such as manageable inflation, low interest rates and a stable peso, were also behind the improved sentiment, Guerrero said.
Business optimism for the next three months, however, declined from the previous survey.
With the CI at 43.9 percent from 53.1 percent in the third quarter, the central bank said respondents had pointed to an expected slowdown in demand after the holidays, stiffer competition, the impact of an ongoing El Nino and global economic uncertainties.
“The next quarter CI suggests that the optimists continued to outnumber the pessimists but the number of respondents with favorable view declined relative to the previous quarter’s survey results,” Guerrero said.
For the last three months of 2015, the BES found increased bullishness among importers and domestic-oriented firms. Pessimism, meanwhile, rose among exporters and dual-activity companies. Sentiment among the two groups switched for Q1 2016.
Sentiment, still, was more favorable across sectors for the current quarter, the BSP said, with confidence rising in the wholesale and retail trade, services and industry sectors.
Construction remained steady. For Q1 2016 confidence was less optimistic across all sectors except industry, which stayed steady.
With regard to business operations, firms held an improved outlook for the fourth quarter, led by those in wholesale and retail trade. Again, sentiment declined for the first quarter of next year, with the exception of those in mining and quarrying.
The employment index for the next quarter, meanwhile, fell to 19.5 percent from 22.3 percent in the previous survey. “This indicates that more firms will continue to hire new employees than those that said otherwise, although the number of new hires could decrease,” the central bank said.
The number of firms with expansion plans, meanwhile, was broadly unchanged at 31.9 percent for Q1 2016. The average capacity utilization rate for the current quarter was up at 77 percent from 76.2 percent.
Firms also expect tighter financial conditions but were of the view that requirements would be met via available credit, the central bank said.
Inflation, lastly, is expected to increase but stay at a low of 2.1 percent in the current quarter and 2.3 percent in January-March 2016. More respondents also expect the peso to appreciate and interest rates to increase this quarter and the next.