Business confidence declines in Q4

Business confidence declines in Q4

Dec 16, 2022, 1:19 PM
Rose De La Cruz

Rose De La Cruz


A less optimistic outlook for this last quarter was reported by the business sector with the confidence index declining to 23.9 percent from 26.1 percent for the same quarter last year.

A less optimistic sentiment was felt by the business community in the fourth quarter this year with overall confidence index (CI) dropping for the second consecutive quarter to 23.9 percent from 26.1 percent in Q3 2022.

The lower index resulted from the increase in the percentage of pessimists over the pessimists due to: (a) higher inflation (i.e., faster increase in prices of consumer goods and services), (b) peso depreciation, (c) decline in sales and demand, (d) rising costs of production inputs, e.g., raw materials and fuel and (e) higher interest rates, the press release of Bangko Sentral showed.

The business outlook for the next quarter also turned less upbeat as the overall CI decreased to 31.3 percent from 43.9 percent a quarter ago. For the next 12 months, business confidence was likewise less optimistic as the overall CI decreased for the third consecutive quarter to 46.2 percent following the previous quarter’s survey result of 57.7 percent.

Business sentiment by sector

The CI across all sectors increased in Q4 2022, except for the services sector. The less positive outlook of the services sector outweighed the more optimistic outlook of the construction, industry, and wholesale and retail trade sectors, which in turn translated to a lower overall CI.

Mixed outlook across all types of trading firms

Across different types of trading firms (i.e., exporter, importer, dual-activity and domestic-oriented), business sentiment was mixed in Q4 2022. Importers and dual-activity firms were less optimistic, while exporters and domestic-oriented firms were more upbeat in the current quarter.

Capacity utilization lower in Q4 2022

The average capacity utilization of the industry and construction sectors was slightly lower at 72.1 percent in Q4 2022 (from 72.7 percent in Q3 2022).

Tighter financial condition and credit access in Q4

Firms expected that their financial condition and access to credit would be tighter in Q4 2022 as their corresponding indices declined further.

Weaker peso, high borrowing and inflation rates in Q4

Businesses expected that the peso may continue to depreciate against the US dollar and that the peso borrowing and inflation rates may continue to rise in Q4 2022, Q1 2023 and the next 12 months.

Further, businesses expected that inflation may breach the upper end of the National Government’s 2–4 percent inflation target range for 2022-2023. In particular, firms were expecting that inflation may settle at 6.2 percent in Q4 2022, 6.1 percent for Q1 2023 and 5.9 percent for the next ­12 months.

Tags: #BSP, #lessoptimism, #confidenceindex

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