Services sector's confidence weakens

 

By Rose de la Cruz

 

Even with a slight drop in business confidence for the second quarter of 2018 (from 39.5 to 39.3 percent) the construction, industry, retail and trade sectors continues to be upbeat but the service sectors are less optimistic for the coming months on account of concerns over the weaker peso and higher commodity costs (particularly fuel) in the global economy.

 

Construction firms' bullish outlook for Q2 2018 was due to the award of new construction projects (both public and private) for 2018 and a better business environment.

 

The sentiment of businesses in the Philippines mirrored the steady business outlook in China, Chile, Mexico, Germany and the Euro Area. Meanwhile, a less optimistic outlook was registered by businesses in the United States, France, the Netherlands and Thailand, while more buoyant views were reported by those in Canada, Hongkong SAR and South Korea.

 

For the quarter ahead (Q32018), business outlook was less positive. The next quarter confidence index (Cl), at 40.4 percent, was lower than the 47.8 percent in the previous quarter's survey. Respondents cited the following factors behind their lower business confidence: (a) interruption of business activities during the rainy season, (b) low consumer demand as households prioritize enrolment expenses, and (c) expectations of higher commodity prices.

 

Trading firms

 

The outlook of trading firms turns more upbeat The outlook of businesses involved in international commodity trading turned more buoyant for Q2 2018.

 

Among business types, exporters were the most bullish because of better prices of export commodities in the worId market, increasing orders from abroad, and anticipated increase in volume of production 'with the ongoing infrastructure development as well as expected uptick in investments as an offshoot of the TRAIN law.

 

Likewise, importers and domestic-oriented firms were more optimistic as they expected that economic growth would be driven by robust consumer demand arising from seasonal factors during summer as well as the high levels of household disposable income as the TRAIN Law takes effect.

 

The outlook of dual-activity (both import and export) firms was also more favorable.

 

But the less favorable sentiment of the services sector weighs down overall business confidence. Business sentiment for Q22018 was generally upbeat across sectors (i. e.  construction, industry and wholesaIe and retail trade sectors), except for the services sector whose views were less positive. Business confidence across industry sub-sectors (i.e. mining and quarrying, manufacturing, and agriculture, fishery and forestry) was broadly more positive, except that of the electricity, gas and water sub-sector, which was less favorable. Respondents attributed their optimism to anticipation of more robust demand, business expansion and enhancement of marketing strategies during the current quarter.

 

The improved outlook of the wholesale and retail trade sector for Q22018 was due to expectations of a brisker domestic economy. This is on the back of the seasonal uptick in demand during summer, enrolment and harvest seasons, stronger business activity over the course of the campaign period for the barangay elections and expected increase in purchasing power of consumers with the implementation of the TRAIN Law.

 

 

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