September 25, 2017, 1:24 am
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Business confidence moderates

Business outlook on the economy turned less optimistic for third quarter of this year, with the overall confidence index (CI) declining to 37.9 percent from 43 percent for the previous quarter, data from the Bangko Sentral ng Pilipinas showed.

This means that the number of optimists declined but continued to be greater than the number of pessimists during the quarter. 

The confidence index 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.

Respondents cited the following factors behind their less buoyant outlook during the third quarter: seasonal factors such as slowdown of business activities during the rainy season, slack in demand during the planting and closed milling season, as well as the closed fishing season in Davao Gulf from July to September; weakening peso; increasing prices; stiffer competition; and, damages and power outages caused by the July 6, 2017 earthquake in the Visayas.

Respondents also cited the Marawi crisis and declaration of martial law in Mindanao, which affected people’s mobility to and in Mindanao.

The sentiment of businesses in the Philippines mirrored the less buoyant business outlook in the US, Canada, The Netherlands, New Zealand, and Thailand but was in contrast to the more bullish views of those in Germany and Hong Kong and steady outlook in France.

For the next quarter, business outlook turned more positive as the CI rose to 51.3 percent from 42.7 percent in the previous quarter’s survey results. 

Respondents’ more positive outlook for Q4 2017 was due to expectations of: uptick in consumer demand during the holiday, harvest and milling seasons; continued rollout of government infrastructure and other development projects; continued increase in orders and projects translating to higher volume of production; expansion of businesses and new product lines; introduction of new and enhanced business strategies and processes; expected favorable weather condition for agricultural products; and positive impact of the proposed tax reform program.

The sentiment of businesses involved in international commodity trading was broadly less favorable for the third quarter as importers and domestic-oriented firms expected lower consumer demand during the rainy season. 

Meanwhile, exporter firms’ outlook was more optimistic for the current quarter. 

For the quarter ahead, the outlook of importers and domestic-oriented firms turned more robust compared to that of the previous quarter. 

Meanwhile, outlook of exporters was steady and that of dual-activity firms was less favorable.

Business sentiment across sectors was less upbeat except for the industry sector particularly in the manufacturing sub-sector, whose views were more favorable for the current quarter. 

Firms’ sentiment across sectors was more buoyant for the fourth quarter.

Respondent firms in the manufacturing sub-sector cited improved market strategies and new product lines as reasons for their optimism, countervailing the less optimistic outlook of firms in the mining and quarrying, agriculture, fishery and forestry, and electricity, gas and water supply sub-sectors.

Meanwhile, construction firms’ outlook for the current quarter was less favorable due largely to the slowdown of construction activities during the rainy season.

For the next quarter, the outlook across sectors and sub-sectors were generally more buoyant due to expected high consumer demand during the Christmas season, inflow of OFW remittances, acceleration of infrastructure development projects and more investments. 

However, the sentiment of the mining and quarrying, and agriculture, fishery and forestry sub-sectors declined slightly for the next quarter due to lower metal prices and closed fishing season from July to September.

The outlook of firms about their own business operations remained positive albeit slightly lower for Q3 2017 compared to that a quarter ago. 

Industry and trade firms expected the volume of their business activities and total orders to grow at a slower rate for Q3 2017 relative to the previous quarter’s survey results. 

In contrast, respondents in the construction and services sectors expected higher growth in their business operations for the same period. For the next quarter, firms across all sectors, except industry, expected the volume of their business activities to step up.

The employment outlook index for the next quarter improved due largely to the more positive sentiment of the services and wholesale and retail sectors offsetting the less optimistic outlook of the industry and construction sectors. 

This suggests that more firms will continue to hire new employees than those that indicated otherwise.

The percentage of businesses with expansion plans in the industry sector for the third quarter decreased slightly to  32.8 percent from 34.6 in the previous quarter. 

Meanwhile, the average capacity utilization for Q3 2017 was slightly higher at 76.7 percent from 75.8 percent in Q2 2017, indicating sustained volume of business activity for the current quarter.

The financial conditions index improved but stayed in the negative territory at -1 percent for Q3 2017 compared to -2 in the previous quarter. 

This means that firms that expected tighter financial conditions outnumbered those that said otherwise during the quarter but those that said so declined compared to a quarter ago. 

Moreover, firms were of the view that their financing requirements could be met through available credit as respondents reported easy access to credit.

The Q3 2017 BES was conducted during the period 3 July - 18 August 2017. There were 1,480 firms surveyed nationwide. 

Respondents were drawn from the combined list of the Securities and Exchange Commission’s Top 7,000 Corporations in 2010 and Business World’s Top 1,000 Corporations in 2015, consisting of 586 companies in NCR and 894 firms in AONCR, covering all 16 regions nationwide. 

The survey response rate for this quarter was lower at 83.6 percent from 83.4 percent in the previous quarter. 

The response rate was lower for NCR at 80 percent from 81.5 percent in the previous quarter but higher for AONCR at 86 percent compared to 84.7 percent in the previous quarter. 
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