Philippine consumers expect a better 2007.

The chart above shows that when consumers in the Philippines were asked in early December 2006 about their spending plans for the current quarter, they said they were ready to buy durables. They also said that they were likely to spend more overall in the first quarter of 2007.

Of course, these opinions were rendered before the spate of disquieting stock market news from around the world. But it is interesting to note that a trend line drawn through the summary statistics about durables (not shown) shows that Philippine consumer feelings about durables slopes sharply upward for the whole period of the graph. This compares with the slightly downward slope of a trend line (also not shown) for the whole period drawn through expectations for the following quarter.

Both plots, though, were accelerating at the end of 2006. One other caveat: The survey was conducted as the festive season in the Philippines at the end of 2006 was just getting underway-generally a time for optimism.

It is further enlightening to note that the consumer confidence indicator (as opposed to the sub index plotted above) slumped slightly in the fourth quarter 2006. The reasons for the slight decline were, "Weaker confidence on the country's general economic condition as well as on their family income and financial situation," according to the Central Bank of the Philippines (BSP). Not surprisingly, wealthier consumers felt better about economic prospects than poorer consumers.

"However," said the BSP, "consumers in all income levels expected conditions will be better in 2007." The BSP adds hat even though confidence was still negative, confidence was at its highest point since the survey began in the third quarter 2004.

In contrast to the overall sagging confidence of consumers, the BSP says that business sentiment for the same period was "upbeat." The BSP said, "This could be partly due to the high proportion of respondents in the lower income group who tend to benefit from favorable business and economic developments with a lag."

As noted in the graph on page 1, consumers were expecting to spend more in the first quarter 2007. The BSP adds the following detail to the survey summary. "A large number of households expected to spend more, particularly on food, clothing and power consumption."

The extensive BSP survey also questioned consumers about feelings in regard to Philippines macroeconomic performance during 2007. In general, consumers said they expected most macroeconomic indicators to remain strong. Four indicators were singled out as showing improvement in 2007. The indicators were: Unemployment, interest rates, the exchange rate, and the rate of inflation.

These expectations are in general agreement with estimates provided by the International Monetary Fund (IMF). The IMF says Philippine GDP will grow 5.4 percent in 2007 compared with 5.0 percent in 2006.

In terms of inflation, the IMF says the rate of growth of inflation will decline significantly to 5.0 percent from growth in the rate of inflation of 6.7 percent in 2006 and 7.6 percent in 2005.

The Philippine survey sampled 3,028 households with 51 percent from the lowest income segment, 38.3 percent from the middle income segment and only 10.2 percent from the upper income segment.

PRODUCT FOCUS: