Business sentiment less optimistic in first quarter, more bouyant for second quarter
Business confidence, while remaining positive, weakened in the first quarter as the overall confidence index (CI) decreased to 32.9 percent from 39.7 percent in the fourth quarter of 2021, the Bangko Sentral ng Pilipinas (BSP) said Thursday.
The lower positive index resulted from the combined effects of a decrease in the percentage of optimists and an increase in the percentage of pessimists.
The respondents’ less buoyant outlook was largely affected by the resurgence of cases from the new Omicron variant and the consequent reimposition of stricter quarantine restrictions in many areas at the beginning of the year.
Other factors that contributed to the weaker business confidence for the first quarter were: (a) increase in prices of raw materials and fuel; (b) decrease in sales/demand for certain goods and services (such as motor vehicles, education services, and construction); (c) weakening peso; and (d) adverse impact of natural calamities, i.e., Typhoon Odette (in December 2021).
For the next quarter, business sentiment turned more buoyant as the overall CI increased to 59.7 percent from 52.8 percent a quarter ago.
For the next 12 months, business sentiment was also more optimistic as the overall CI increased to 69.8 percent from previous quarter’s survey result of 67.6 percent. This is the highest reported CI for the next 12 months since the BES started to collect outlook for the next 12 months in the third quarter 2019.
A less favorable outlook was observed across the different types of trading firms (i.e., exporter, importer, dual-activity, and domestic-oriented) as all types of trading firms registered lower CI in the first quarter.
Meanwhile, the outlook for the second quarter of importers, dual activity firms, and domestic-oriented firms was more buoyant, while that of exporters was less optimistic. For the next 12 months, domestic-oriented firms continued to be more bullish for the second consecutive quarter, whereas importers and exporters turned bearish. Meanwhile, dual-activity firms’ optimism was relatively steady.
Similarly, the outlook across sectors turned less optimistic in the first quarter as the CIs dropped for firms in the industry, construction, services, and the wholesale and retail trade sectors.
For the second quarter, business outlook was more bullish for all sectors except the construction sector, whose sentiment turned less optimistic. Likewise, the CIs across all sectors for the next 12 months, except for the industry sector, recorded all-time highs in the current quarter.
Consistent with the national trend, the outlook of firms on their own business operations, as measured by their views on the volume of business activity and total orders booked, was less optimistic in the first quarter.
Meanwhile, a more optimistic outlook on the volume of business activity was recorded for the second quarter but a less upbeat outlook was recorded for the next 12 months.
The average capacity utilization of the industry and construction sectors in the first quarter slightly decreased to 70.2 percent (from 70.6 percent in the fourth quarter of 2021). In particular, the average capacity utilization of the industry sector in the first quarter is 69.4 percent (from 69.9 percent in the fourth quarter of 2021).
The financial conditions index turned less negative at -19.1 percent in the first quarter from -22.4 percent in the previous quarter. Further, more firms indicated that their access to credit in the first quarter was still constrained as the credit access index remained in negative territory at -2.9 percent in the first quarter from -7.7 percent in the fourth quarter of 2021.
The employment outlook index inched higher to 24.7 percent for the second quarter (from 24.5 percent in the fourth quarter survey results), but was lower for the next 12 months at 28.9 percent (from 32.4 percent).
The slightly higher positive reading for the second quarter suggests that firms are looking forward to hiring more people in the next quarter, while the lower index for the next 12 months implies that firms are still looking to hire, but at a lesser degree, in the next several months.
Moreover, the percentage of businesses in the industry sector with expansion plans for the second quarter declined to 20.8 percent (from 23.2 percent in the fourth quarter of 2021 survey results).
Similarly, the percentage of industry firms with expansion plans for the next 12 months decreased to 25.6 percent (from 26.8 percent).
The survey results showed that businesses expect that the peso may depreciate against the US dollar in the first and second quarter, but begin to appreciate in the third quarter up to first quarter of 2023, i.e., within a 12-month period.
Results also indicated that firms expect the peso borrowing and inflation rates may rise in the first and second quarter, and the next 12 months. Businesses are expecting that inflation will settle at 4.2 percent for the first half and in the next 12 months, which is slightly higher than the upper end of the government’s 2–4 percent inflation target range for 2022.
The first quarter BES was conducted during the period January 21 – March 4 2022. There were 1,498 firms surveyed nationwide, consisting of 578 companies in NCR and 920 firms in Areas outside NCR , covering all 16 regions nationwide.
Samples were drawn from the Top 7,000 Corporations ranked based on total assets in 2016 from the Bureau van Dijk (BvD) database. The nationwide survey response rate for this quarter was lower at 53.4 percent (from 58.5 percent in the fourth quarter of 2021). The response rate was higher for NCR at 52.9 percent (from 49.7 percent), but lower for Areas outside NCR at 53.7 percent (from 64.1 percent). BSP
