New construction, summer arrivals, enrollment drive up Q2 confidence

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Sunday, May 25, 2014

STRONG consumer demand fed by the graduation, summer and approaching enrollment seasons helped push up businesses’ confidence in the second quarter.

The Bangko Sentral ng Pilipinas (BSP) reported that the overall confidence index (CI) rose to 50.7 percent from 37.8 percent in previous quarter’s survey.

Respondents named the following factors for their more upbeat outlook: robust consumer demand during the secondary harvest season, graduation and enrollment periods, as well as the arrival of tourists during the summer; new construction projects as part of rehabilitation efforts; and increase in orders and new contracts or projects;


expansion of businesses, launch of new product lines and rise in investments with the recovery of the US and other export markets; and continuing confidence in the administration.

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.

Robust macroeconomic fundamentals such as manageable inflation and steady growth of remittances, as well as more favorable external conditions, supported the positive business outlook.

The sentiment of businesses in the Philippines mirrored the buoyant business outlook in the US, UK, Canada, Germany, Hong Kong, Singapore and South Korea but was in contrast to the less bullish views of those in China, New Zealand and India, the BSP said.

For the third quarter, respondents told the central bank that they anticipated continuing economic. This was due in part to the more optimistic outlook of firms in the wholesale and retail trade and construction sectors.

“However, optimism was dampened by expectations of firms engaged in manufacturing and hotel and restaurant services, which expected slack demand during these months,” the BSP said.

The outlook of businesses involved in international commodity trading turned more favorable for the second quarter.

“Among business types, dual-activity firms were the most optimistic, posting a record-high CI of 54.4 percent. Importers expected that growth would be driven by higher consumer demand during the summer and enrollment period,” it added.

Across sectors, the business outlook was more bullish. Firms in the construction sector were the most optimistic, followed by the services, wholesale and retail trade and industry sectors.

The construction sector was the most optimistic among all sectors in the current quarter, with the CI matching the all-time-high confidence level of 60.2 percent recorded in the second quarter of 2013.

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. (BSP)

Published in the Sun.Star Cebu newspaper on May 26, 2014.


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