Inflation concerns weaken consumer sentiment in Q1 2018

Chris Schnabel

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Inflation concerns weaken consumer sentiment in Q1 2018

AFP

The Bangko Sentral ng Pilipinas says the overall confidence index dropped to 1.7% in the 1st quarter of 2018 from 9.5% in the 4th quarter of 2017, as consumers fear higher prices and low income

MANILA, Philippines – Higher prices of goods in the first few months of the year dampened consumer spirits, according to the Bangko Sentral ng Pilipinas (BSP).

Consumer confidence weakened but remained positive in the 1st quarter of 2018, with the overall confidence index (CI) declining to 1.7% compared to the 9.5% in the 4th quarter of 2017.

This is based on the BSP’s Consumer Expectations Survey (CES) for the 1st quarter of 2018, released on Monday, March 26.

“The lower but positive CI indicates that the number of optimists decreased but continued to outnumber the pessimists,” the central bank explained.

The BSP pointed out that this “was mainly brought about by respondents’ expectations of higher prices of goods, low income, and rise in household expenses.”

Respondents also cited concerns over increasing household debts, occurrence of typhoons and other calamities, and poor harvest.

Inflation hit successive 3-year highs of 4% and 4.5% in January and February this year, coinciding with the initial implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law.

The latest CES showed that consumer confidence waned for all 3 major components:

  • the Philippines’ economic condition
  • family financial situation
  • family income

The BSP noted that the CI for the country’s economic condition and family financial situation fell into negative territory for the 1st quarter of 2018.

Of the 3 components, confidence in the Philippine economy suffered the biggest drop at -0.1% from 10.9% in the previous quarter, while confidence in family financial situation fell to -1.3 % from 7.3%.

Confidence in family income, meanwhile, dropped to 6.6% from 10.3%.

Higher prices expected

The latest CES also showed that consumers are expecting higher prices for the 2nd quarter as well as the rest of the year.

The BSP said respondents anticipated the rate of increase in commodity prices to be 4.7%, which is above the government’s 2% to 4% inflation target range for 2018, and higher than the expected 3.6% in the previous quarter’s survey.

For the 2nd quarter, consumers expect increased spending on electricity, food, non-alcoholic and alcoholic beverages, fuel, water, and transportation.

The CES also showed that more respondents expect interest and unemployment rates to rise, and the Philippine peso to weaken against the United States dollar, in 2018.

The overall CI for the 2nd quarter of 2018 declined to 8.8% from 17.5% a quarter ago, while the overall CI for the entire 2018 fell to 24% from 32%.

Consumers’ lowered expectations for this year followed the country’s business sector also indicating weaker confidence in the economy.

The CES for the 1st quarter of 2018 was conducted from January 24 to February 3. A total of 5,569 households had been polled, 49.7% of which were from Metro Manila and 50.3% from areas outside the capital region. – Rappler.com

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