By Macon Araneta
Business optimism on the economy remained positive albeit lower for Q1 2016, with the overall confidence index (CI) declining to 41.9 percent from 51.3 percent for Q4 2015, said the Department of Finance (DOF).
The DOF said this indicates that the number of optimists declined but continued to be greater than the number of pessimists during the quarter.
The CI is computed as the percentage of firms that answered in the affirmative less the percentage of firms that answered in the negative with respect to their views on a given indicator.
According to respondents, their less upbeat quarter-on-quarter outlook was due to the following factors: usual slowdown in business activity and moderation of consumer demand after the holiday season, decline in global oil prices and other commodities and the growing concerns about the outlook for global growth amid continued weakness in China.
They also cited the “wait-and-see attitude” of businesses with regard to the outcome of the 2016 national and local elections, adverse effects of El Niño on crop production and businesses and strong market competition, and bearish trend of the Philippine stock market.
The sentiment of businesses in the Philippines mirrored the less sanguine business outlook in the United Kingdom, Germany, China, and Korea, but was in contrast to the more buoyant views of those in the United States, Canada, France, Netherlands, and Russia. Meanwhile, a more pessimistic outlook was registered by businesses in Hong Kong SAR and Singapore.
For the next quarter (Q2 2016), business outlook turned more optimistic, with the CI rising to 49.6 percent from 43.9 percent in the last quarter’s survey.
The next quarter CI suggests that economic growth could be higher for the next quarter.
Across different types of businesses, the sentiment was mixed for Q1 2016.
The outlook of importers and domestic-oriented firms was less sanguine, while exporters and dual-activity (both importer and exporter) firms’ outlook was more positive. For the quarter ahead (Q2 2016), the outlook of firms across trade groups improved.
Business sentiment was mixed across sectors for Q1 and Q2 2016. The outlook of the services and wholesale and retail trade sectors for the current quarter was less favorable compared to that in the previous quarter, following the national trend.
Meanwhile, the sentiment of the construction sector was steady, while that of industry was more buoyant. For the next quarter (Q2 2016), optimism was higher in the industry, wholesale and retail trade, and services sectors, but lower in construction.
Industry firms’ outlook was bullish both for the current and next quarters, particularly in the electricity, gas and water supply and manufacturing sub-sectors.
Construction firms’ outlook for Q1 2016 was steady due largely to the pending results of bidding for 2016 projects.
The lull in construction activities is expected to affect businesses for the next quarter (Q2 2016), with the outlook of construction firms remaining less positive.
The outlook of firms in the wholesale and retail trade sector was less sanguine for Q1 2016 but turned more upbeat for Q2 2016.
The less favorable outlook of the trade sector for the current quarter stemmed from expectations of a slack in consumer demand and business activities after the Christmas season, and stiffer domestic competition emanating from the construction of new malls.
Likewise, the services sector’s outlook was less sanguine for Q1 2016 compared to the outlook a quarter ago due to the seasonal slack in demand for hotels and restaurants and real estate services after the holiday season.
The outlook of firms in the services sector was slightly more upbeat for Q2 2016 on account of the usual rise in demand during summer and harvest seasons, brighter prospects with the upcoming elections due to campaign-related spending and the change in administration in May, low oil prices, improved marketing strategies, new investment opportunities, and improvement in the collection of accounts receivables.
In line with the favorable but lower overall business confidence for Q1 2016, the sentiment of firms about their own business operations and the volume of total orders booked was less upbeat across sectors compared to that a quarter ago.
However, in anticipation of brisker business for Q2 2016, the outlook of firms on the volume of business activity for the quarter ahead turned more optimistic across sectors.
The employment outlook index rose to 27.2 percent from 19.5 percent last quarter. This indicates expectations of an overall increase in the number of new employees to be hired for the second quarter of the year.
The percentage of businesses with expansion plans in the industry sector for Q2 2016 remained broadly steady at 31.3 percent. Meanwhile, average capacity utilization for the current quarter decreased to 74.8 percent from 77 percent registered last quarter.
The financial conditions index increased slightly albeit remaining in the negative territory at -0.1 percent for Q1 2016 from -0.7 percent in the previous quarter.
Although more respondents continued to expect inflation to rise for the current and next quarters compared to those who said otherwise, businesses expected the rate of increase in commodity prices to remain low at 1.9 percent for Q1 2016 and 2.1 percent for Q2 2016.
