Business Confidence Optimistic, Construction In Upswing

Business sentiment in the Philippines remained optimistic in Q3 2024, with the overall confidence index (CI) steady at 32.9 percent, slightly up from 32.1 percent in Q2 2024.

For Q4 2024, business confidence turned bullish, with the CI rising to 56.8 percent from 43.7 percent in Q2 2024.

The sentiment reflects a decrease in pessimists, outweighing the slight decrease in optimists.

Businesses' optimism in Q3 2024 was driven by expectations of: (a) increased demand for goods and services, such as food and beverages, apparel, education, and personal services, (b) easing inflation, (c) a seasonal uptick in business activities due to the new school term and pre-holiday inventory stocking, and (d) expansion and improvement of operations.

For Q4 2024, business confidence turned bullish, with the CI rising to 56.8 percent from 43.7 percent in Q2 2024. Looking ahead to the next 12 months, business outlook remained upbeat, with the CI increasing to 58 percent from 56.5 percent in Q2 2024.

Confidence was more optimistic in the construction and services sectors but less buoyant in industry and wholesale/retail trade.

The average capacity utilization of the industry and construction sectors remained steady at 71.9 percent, slightly down from 72 percent in Q2 2024. Firms expect tight cash positions and limited access to credit in Q3 2024.

They also anticipate that the peso may depreciate against the U.S. dollar in Q3 2024, but recover in Q4 2024 and the next 12 months.

Firms foresee rising borrowing rates and inflation for the rest of 2024, with inflation projected to average 4.3 percent in Q3 and 4.4 percent in Q4 2024 and the next 12 months—above the government’s 2-4 percent target.