By Rose de la Cruz | Published: September 25, 2020
Consumers are pessimistic about the third quarter of 2020 with the overall confidence index (CI) dropping to a record low of -54.5 percent since the nationwide survey began in 2007.
COVID-19 and the resultant recession from lack of economic activities during the lockdown caused the respondents to be less hopeful owing to: a) high unemployment rate and less working family members; b) low and reduced income and c) faster increase in the prices of goods.
The Bangko Sentral, which conducted the survey, said pessimism also marks the coming fourth quarter as the CI moved to the negative territory at -4.1 percent from the first quarter level of 9.2 percent.
Apart from concerns over COVID-19, consumers also anticipate the same negative factors to prevail in the fourth quarter.
But for the next 12 months (from survey) consumers are more optimistic with the CI increasing to 25.5 percent from the Q1 2020 survey result of 19.9 percent for the next 12 months. The consumer outlook was more upbeat for the next 12 months due to expectations of an end to the pandemic or return to normalcy with: (a) availability of more jobs, (b) additional or high income, and (c) stable prices of goods.
For the third quarter, the CIs on the family’s financial situation and family income registered all-time lows. Likewise, for Q4 2020, consumer sentiment across indicators weakened, particularly on the economic condition and family financial situation, where CIs reverted into the negative territory
By income group, the negative all-time low overall CI for Q3 2020 was reflected across income groups, with the low-income group reporting the lowest CI, followed by middle- and high-income groups. Aside from the reasons cited by the consumers’ negative outlook for Q3 2020, consumer confidence for the middle-income group turned pessimistic due to expectations of higher household expenses. For Q4 2020, the sentiment of consumers across income groups turned pessimistic, but improved for the next 12 months, compared with the Q1 2020 survey results.
Households spending outlook index on basic goods and services declined to 26.4 percent for Q4 2020, the lowest CI recorded since Q1 2007, indicating a contraction in consumer spending in the next 3 months.
The percentage of households in the country that considered Q3 2020 as a favorable time to buy big-ticket items (i.e., consumer durables, motor vehicles, and house and lot) declined to 12.8 percent, almost half of the 24.2 percent recorded in Q1 2020. Further, the percentage of households in the country that considered the next 12 months as a favorable time to buy big-ticket items also declined to 4.5 percent from 6.5 percent recorded in Q1 2020.
For Q3 2020, the percentage of households with savings declined to 24.7 percent from 37.8 percent in Q1 2020. The decrease in the number of savers can be seen across income groups, particularly in the middle- and high-income groups, which registered all-time lows since Q1 2007.
Among the households with savings, the majority or 71.1 percent of savers kept their money in a bank for Q3 2020, though this percentage was lower compared with 73.9 percent in Q1 2020. Meanwhile, 61.8 percent kept their savings at home and 48.9 percent considered other institutions such as cooperatives, paluwagan, other credit/loan associations, or in investments.
Consumers expect inflation, interest rates and unemployment rates to increase, and the exchange rate to appreciate for Q3 2020; Inflation to remain within target at 2 to 4 percent
The survey results showed that consumers anticipated the interest rates to increase, and the peso to appreciate for Q3 2020, in the next quarter and in the next 12 months. Respondents also expected that unemployment rate would rise for Q3 2020 and Q4 2020 but would decline over the next 12 months.
Households anticipated that the rate of increase in commodity prices will remain within the government’s inflation target range of 2 to 4 percent for 2020 and 2021—at 2.5 percent for Q3 2020, 2.6 percent for Q4 2020, and 2.8 percent for the next 12 months.
The number of OFW households that utilize their remittances for the purchase of food and other household needs increases for Q3 2020
For Q3 2020, 97.2 percent of the 326 OFW households (from 93.9 percent in Q1 2020) indicated that remittance proceeds are used to purchase food and other household needs. Further, the percentage of OFW households that apportioned their remittances for debt payments (18.4 percent) and investment (6.4 percent) were higher compared with the Q1 2020 survey results. Meanwhile, the proportion of OFW households that allotted part of their remittances for education (60.1 percent), medical expenses (49.4 percent), purchases of consumer durables(16.9 percent), houses (7.1 percent), motor vehicles (2.8 percent) and savings (31.6 percent) declined. The latter registered the biggest decline among these types of remittance use, when compared with the Q1 2020 survey results.
For Q3 2020, about 1 in every 3 households, or 29 percent, reported that they availed of a loan in the last 12 months. On credit access, 87.3 percent of the respondents found it easy to apply for a loan.
However, the remaining 12.7 percent found it difficult due to the following concerns: (a) numerous requirements, (b) difficulty locating individual money lenders, and (c) COVID-19 pandemic.