Majority of consumers expect a weaker economy in the second and third quarters while the business community projects that state to persist in the next 12 months, a survey by the Bangko Sentral ng Pilipinas (BSP) showed Friday.

The consumers’ overall confidence index (CI) in the economy for the second quarter dropped to -20.5 percent from -10.9 percent in the first quarter. This sentiment is shared by all income groups.

This means, out of the total survey respondents, fewer people are optimistic.

For the third quarter, the CI declined to -0.4 percent from 2.7 percent recorded in the first quarter.

However, the consumer sentiment for the next 12 months remained optimistic as the CI was relatively unchanged at 13.5 percent from 13.4 percent.

Reasons for the pessimism in certain periods include expectations of higher prices, lower income, and fewer jobs. The BSP added consumers also worry about the government’s management of traffic, public transportation, and provision of financial assistance.

Consumers expect inflation to increase moderately in the third quarter and the next 12 months or an inflation average of 5.5 percent. This is beyond the BSP’s target of 2 to 4 percent.

They also expect a weaker peso against the US dollar until the third quarter and the next 12 months.

Given the negative sentiment, the BSP said consumers have become hesitant to buy big-ticket items since April. The CI in this area declined to -64.5 percent from -62.6 percent.

Fewer households also availed of loans in the second quarter as the CI inched down to 24.6 from 24.9 percent.

Similarly, households with savings in the second quarter decreased to 31.4 percent from 33.5 percent.

However, in terms of interest rates, consumers project a downtrend from the levels in the second quarter.

Rates seen higher

More firms are also pessimistic, with a lower overall CI for the second quarter of 32.1 percent from 33.1 percent.

For the third quarter, the CI also declined to 43.7 percent from 48.1 percent.

The negative outlook extends to the next 12 months, with a lower CI of 56.5 percent from 60.8 percent.

Firms’ pessimism stems from softer demand for goods and services, including personal care and health products, construction supplies, city hotels and restaurants, and manpower services. Other reasons are inflationary risks on oil due to global conflicts and higher food prices due to extreme weather.

Unlike the consumer group, firms said higher inflation and interest rates could extend in the third quarter until the next 12 months.

Firms expect inflation rates to average at 4.3 percent in the second quarter, increase to 4.4 percent in the next quarter and to 4.5 percent until April 2025.

Compared with other sectors, the BSP said the wholesale and retail trade sectors feel more upbeat in the second quarter. Importers share this sentiment.

Construction and the services sectors are pessimistic for this period, reflecting a lower average capacity utilization rate of  72 percent from 72.3 percent.

With the uncertainties from global conflicts and weather conditions, firms expect tighter credit access.

However, they see the peso appreciating beyond the third quarter or until April 2025.