Unemployment decline, hefty remittances buoy consumer spending

ata from the Philippine Statistics Authority showed the country’s unemployment rate declined to 5.5 percent in June 2018 from a high of 6.6 percent posted in March 2017. (Pixabay photo)

MANILA — The declining number of unemployed as well as a hefty inflow of foreign remittances are seen to support local consumer spending in 2018 until 2019, a Fitch Group unit reported Friday.

Fitch Solutions’ industry trend analysis on consumer and retail noted that spending of Filipino consumers between 2018 and 2019 remains optimistic despite rising inflation due to higher excise taxes, increasing global oil prices, sustained high credit growth.

“Our favorable outlook for the Philippine consumer is further underpinned by an improving labor market,” Fitch Solutions said.

Data from the Philippine Statistics Authority showed the country’s unemployment rate declined to 5.5 percent in June 2018 from a high of 6.6 percent posted in March 2017.

Fitch Solutions mentioned that wage growth will also back consumer spending in the domestic market as the Department of Labor and Employment is set to announce minimum wage hikes in several more regions.

But the think tank said best consumer prospects will remain concentrated in urban retail areas such as Manila, Quezon City, and Davao.

Moreover, the strong remittances from overseas Filipinos will continue to support consumers’ purchasing power in 2018 and 2019.

Fitch Solutions has seen the strengthening of United States dollar against Philippine peso to back remittances inflows and spending.

“With over 2.5 million Filipinos living and working in the US, Philippine households will continue to receive a large share of remittances in US dollar and therefore depend on the strength of the US dollar,” Fitch Solutions said.

“Philippine households receiving remittances denominated in US dollar will see purchasing power rise with the US dollar appreciating against Philippine peso, buoying essential spending categories such as food and clothing,” it added.

But it also noted that inflationary pressures will remain a risk to consumer spending.

But even with a pickup in inflation, Fitch Solutions said consumer confidence in the Philippines remains high.

Its MasterCard Consumer Confidence survey in December 2017 showed that consumer confidence in the Philippines stood at 94.5, higher than the 91.6 index in December 2016.

Filipino consumers’ confidence is also one of the strongest in Asia, scoring higher than China’s 92.2, Cambodia’s 92.2, and Myanmar’s 91.7.

“The consumer outlook for the Philippines remains bright on the back of a strong economic growth trajectory, high levels of remittance inflows and falling unemployment,” Fitch Solutions stressed.

“Nonetheless, the Philippines remains one of the strongest consumer growth markets in Asia and this continues to present significant opportunities for consumer-facing companies,” it noted.