The confidence index fell to 34.4% this quarter in the central bank’s latest Business Expectations Survey (BES) from the 50.7% recorded last quarter and the 42.8% recorded for July-August last year. The latest result was also the lowest since the 34.1% seen in the third quarter of 2011.
The latest BES, conducted from July 1 to August 15, polled representatives of 1,527 firms nationwide drawn from the Securities and Exchange Commission’s Top 7,000 Corporations in 2010 and BusinessWorld‘s Top 1000 Corporations in 2010.
Respondents attributed the dip to expectations of a seasonal slack in demand due to interruption of business activities during the rainy season; lower consumer spending amid higher education fees and tax payments the previous quarter; increase in prices of basic commodities and higher overhead costs of raw materials and utilities; unresolved congestion at Manila’s ports; and “political noise” from the controversy about the Disbursement Acceleration Program and the Priority Development Assistance Fund.
“The sentiment of businesses in the Philippines mirrored the less bullish outlook in the United Kingdom, Canada, Germany, New Zealand, Singapore, Hong Kong, and India but was in contrast to the more buoyant views of those in the US and China,” the BSP said in a statement.
Optimism fell across all sectors, with construction posting the biggest drop 17.9 points to 42.3 this quarter from the previous three months.
“Construction firms’ outlook in the current quarter was less sanguine due largely to the slowdown of construction activities during the rainy season,” the central bank explained.
Among the firms surveyed, both importers and exporters were less optimistic as a result of an expected seasonal fall in demand, as well as disruption of business operations caused by the truck ban and port congestion in Manila.
BETTER NEXT QUARTER
Business sentiment for the quarter ahead, however, hit 52.9% -- the highest since the 60.0% logged in the third quarter 2013 survey.
“Respondents’ more positive outlook in Q4 was due to expectations of brisker business in view of the expected increase in consumer spending during the holiday season; expansion in retail trade, infrastructure, power and telecommunication, education, and healthcare businesses; higher exports of garments and metals with the recovery of global markets; and increase in orders for manufacturing products leading to higher volume of production,” the BSP said.
In addition, expectations of steady growth of overseas Filipinos’ remittances, surge in investment inflows, and roll-out of major public-private partnership projects boosted business confidence for the last three months of the year.
Moreover, while firms that expected tighter financial conditions continued to outnumber those that said otherwise, they also believed financial requirements can be met with available credit.
The central bank also noted that, for next quarter:
• respondents expect an overall increase in the number of new employees to be hired -- particularly for industry, as well as wholesale and retail trade; while
• percentage of businesses with expansion plans rose to 34.2% from 30.0% in the second quarter survey and 32.1% in the third quarter of 2013, driven particularly by manufacturing; electricity, gas and water; as well as agriculture, fishery and forestry; but weighed by mining and quarrying.
Finally, respondents who expected inflation to pick up this quarter and the next increased compared to the previous quarter’s survey, though expectations were still “well-anchored” at 4.2% for the third and fourth quarters -- compared to 4% and 4.1%, respectively, in the past survey -- hence, still within the central bank’s 3-5% full-year target. -- D. E. D. Saclag
source: Businessworld
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