Manila: Business sentiment improved as firms expect favorable corporate earnings and lower oil prices, but consumer confidence declined in May this year, results of Bangko Sentral ng Pilipinas (BSP) surveys showed.
According to Philippines News Agency, results of the latest Business Expectations Survey (BES) released on Friday showed that business sentiment improved in May, driven by expectations that stronger consumer spending will support corporate earnings. The overall business confidence index (CI) improved to -25.2 from -35.8 in April. Businesses were also more optimistic about the next three to 12 months, citing stronger growth prospects in the manufacturing and construction sectors, lower fuel prices, easing inflation, and the possible resolution of the Middle East conflict. They, likewise, expect a recovery in investor confidence over the period. Firms also reported that they intend to hire more workers over the next three to 12 months as they expect business activities to increase over the same period.
The BSP earlier this year shifted to a monthly BES to provide a more timely assessment of business confidence and enable the BSP to respond more proactively to evolving domestic and global developments.
Results of the latest Consumer Expectations Survey (CES), meanwhile, showed that consumer confidence declined substantially in the second quarter of the year, as more households anticipated higher food and fuel prices due to the Middle East conflict. The confidence index (CI) was at -42 from -15.6 in the first quarter. Consumers likewise expected higher unemployment and a weaker Philippine peso.
The BSP said consumers also anticipated higher spending on essential goods and services but were less inclined to purchase big-ticket items such as motor vehicles and real properties. Households are also less likely to borrow and save, reflecting a more guarded outlook on their finances. Year-ahead inflation expectations of households slightly exceeded the BSP's 3-percent target but remained below the 4-percent tolerance ceiling. Respondents expect inflation to accelerate mainly due to higher prices of food and utilities.
The CES is a key economic surveillance tool of the BSP. Results of the survey are among the forward-looking indicators considered in monetary policy formulation. "The BSP continues to closely monitor the impact of the Middle East conflict on domestic prices, broader economy, and consumer and business expectations," the central bank said.
