By Bianca Cuaresma
The business sentiment that soured in the first three months of the year took a turn for the better in the April-to-June period, as the confidence index (CI) lifted to 49.2 percent from 45.2 percent, the Bangko Sentral ng Pilipinas (BSP) said on Friday.
The uptick in business enthusiasm came just a day after government statisticians confirmed that local output, measured as the gross domestic product (GDP), had been sapped of its potential to only 5.2 percent during the period, and well below consensus output growth of 6.6 percent that the markets expected.
The CI is computed as the percentage of optimistic firms less those holding the opposite view. A higher CI means optimists among businesspeople outnumber the pessimists. According to the BSP, the buoyant business sentiment was fueled by robust consumer demand during the secondary harvest and fishing seasons; graduation and enrollment periods; and summer season, given the influx of both local and foreign tourists.
It was also fed by the expected increase in activities in the construction sector, particularly infrastructure-related government projects; increase in orders and new contracts leading to higher volume of production; and the expansion of business and their continued confidence in the current administration.
The buoyant optimism among businessmen in the Philippines mirrored the buoyant business outlook of counterparts in the United States, Germany, South Korea and Singapore.
This contrasted with business sentiment in the United Kingdom, Hong Kong and India where the collective view was once considered less bullish by the BSP.
According to the BSP, business confidence across sectors proved buoyant in the second quarter.
“Business sentiment across sectors was more bullish for second quarter 2015. For the next quarter (third quarter 2015), however, the outlook was less upbeat, with the exception of those in the construction sector,” it reported.
“The construction sector was the most optimistic among all sectors for the current quarter, with the CI at an all-time high. Firms belonging to this sector expected that the expansion of construction services would be sustained, particularly as more public infrastructure projects were started during the quarter. Construction activities related to power generation were also reported to be on the rise during the current quarter. The services sector was, likewise, more upbeat for the current quarter, generally on account of the expected better economic prospects in the country. The sanguine outlook of the wholesale and retail trade sector stemmed from respondents’ expectations of a surge in consumer demand during the summer and enrollment periods, good harvest season, continued business expansion with new product lines and infrastructure development (both public and private), low oil prices and a favorable business climate. Respondents in the industry sector attributed their optimism to the favorable weather conditions, the onset of the fishing season and expected increase in electricity consumption during summer.
“For the next quarter [third quarter 2015], the outlook across sectors was broadly less buoyant due to the expected seasonal slack in demand during the rainy season. This is with the exception of those in the construction sector whose optimism was driven by expectations of brisker activities due to the continued rollout of government projects and new infrastructure development projects in the pipeline, the BSP added.
The confidence index during this period stood at a 47.3 percent.
The other findings of the BSP survey on business sentiment include the following:
■ Businesses were more upbeat about their operations;
■ The number of firms with expansion plans diminished during this period even thought their capacity utilization remained broadly steady;
■ There was optimism their funding requirements will be met on account of easy access to credit; and
■ Inflation were to remain low within the 2- to 4-percent range.
The BSP regularly conducts surveys like this one because it allows the monetary authorities to have a better sense of where the economy was going and how best to support that end without driving prices higher and making it more stable instead.