More consumers are worried about the economy and their financial conditions in the second quarter but businesses do not share the pessimism, a survey by the Bangko Sentral ng Pilipinas (BSP) showed Friday.

Based on the BSP’s survey for consumer confidence, pessimism persisted for the second quarter as the confidence index (CI) declined to 2.7 percent from 5.6 percent.

These figures were seen from the BSP’s surveys done in the first quarter this year and last quarter of 2023.

The BSP said reasons for the consumers’ latest sentiment include their anticipation of a faster increase in the prices of goods, fewer available jobs and lower income.

Consumers are also less optimistic for the next 12 months as their CI for the coming period fell from 15 percent to 13.4 percent.

Low-income consumers feel outright pessimistic about the economy in the second quarter, while middle and high-income consumers feel only less hopeful for a prosperous future.

For the next 12 months, more consumers are keen on buying big-ticket items as the CI improved to negative 69.8 percent from negative 70.9 percent.

More households owned savings in the first quarter this year, with 33.5 percent share compared to 29.1 percent recorded in 2023.

Similarly, more households availed of loans in the last 12 months, with 24.9 percent share compared to 22.9 percent recorded in the older survey.

The BSP said consumers expect a higher interest rate in the long term or until January 2025.

Currently, the central bank imposes a policy rate of 6.5 percent.

It added that consumers also see the peso weakening against the US dollar, which means higher prices for most goods with imported components.

“Consumers are expecting that the inflation rate may average at 5.3 percent for the next 12 months, which is above the upper end of the National Government’s inflation target range of 2 to 4 percent,” BSP said.

Households expect a moderate growth in the country’s unemployment rate in the second quarter, which they said will likely be reversed in the next 12 months.

Business sentiment improves

On the other hand, more businesses feel upbeat about the overall economy in the second quarter as the CI rose to 48.1 percent from 38.2 percent.

Reasons for optimism are possible higher demand for products and services; completion of more projects due to a more conducive business environment; and seasonal uptick in business activities in the tourism and fisheries sub-sectors during the summer and open fishing seasons.

The other factors are business expansions and development of new products, and easing inflation.

Moving further, the BSP said businesses are even more upbeat for the next 12 months due to prospects of sustained strong demand for products and services, continued favorable economic conditions, lower inflation, business expansions, and lower interest rates.

Construction firms feel less optimistic than players in other industries, such as retail, services and manufacturing, toward the next 12 months.

Importers, exporters and domestic-oriented firms are also upbeat for the second quarter.

Due to their generally optimistic outlook, the BSP said firms are keen on hiring more workers, or adding products or tools in the long term.

However, the BSP said businesses expect to navigate challenges from possible higher interest and inflation rates.

Thus, they see inflation to hit over 4 percent within this year until 2026.

“In particular, businesses expect that the inflation rate may average at 5 percent in the first half of 2024 and the next 12 months,” BSP said.

However, businesses project the peso to strengthen against the US dollar, providing some relief from inflation.