By Katherine K. Chan, Reporter 

PHILIPPINE BUSINESS sentiment turned less pessimistic in August, even as firms worried about bad weather and elevated inflation that pushed up operating costs, a survey by the central bank showed.

The Bangko Sentral ng Pilipinas’ (BSP) latest monthly business expectations survey (BES) yielded a -10.9% current-month confidence index (CI) in August, improving from the -20.3% in July.

“Firms attributed the improvement to expectations of higher demand for essential commodities, loan products, and construction activities,” the central bank said in a statement late on Friday.

However, August marked the second straight month that local businesses’ CI remained pessimistic.

“(T)he business confidence index remained in negative territory during the month,” the BSP said. “Firms continued to cite concerns over adverse weather conditions, elevated inflation, persistent oil price increases, cautious consumer spending on leisure and travel activities, and higher production and operating expenses.”

A negative CI shows that more respondents are pessimistic than optimistic, while a positive CI indicates otherwise.

In August, parts of the country encountered heavy rains and flooding as multiple tropical cyclones enhanced the southwest monsoon. 

Still, headline inflation eased to a five-month low of 6.1% but stayed above the central bank’s 3% target for the sixth month in a row. This brought the country’s eight-month average inflation to 5.2%.

Fuel prices during the month also remained above the prewar range of P50 to P60 per liter, with gasoline sold between P64.20 and P96.57 per liter, diesel at P77 to P100.84 per liter, and kerosene at P99.10 to P133.32 per liter.

However, the BES showed that firms were more optimistic for the next quarter and the coming year as they anticipate business conditions to improve as the economy recovers.

For the next three months, firms’ CI jumped to 24.6% in August from 3.7% in the previous month, which the BSP said came on the back of expected stronger demand for consumer and financial products and services as well as increased business activities amid the holiday and rice harvest season.

Meanwhile, their CI for the year ahead stood at 36.4%, higher than the 29.4% logged in July.

“The outlook of firms was more favorable due to expectations of the following: improving consumer spending in tourism, construction, education, and financial activities; easing inflation; possible resolution of the Middle East conflict; enhancement in business operations; (and) improved investor confidence,” the BSP said.

On the other hand, Philippine firms see easing financial conditions, but slightly tighter credit access, citing stiff domestic competition, insufficient demand, and higher borrowing costs.

Based on the BES, businesses’ financial condition index, which gauges their general cash position considering the level of cash and other cash items and repayment terms on loans, improved month on month to -24.9% in August from -31.4%.

However, their credit access index worsened to -7.2% from -7%. This refers to the firm’s external environment, such as the availability of credit in the banking system and other financial institutions.

Meanwhile, firms’ average capacity utilization in the industry and construction sectors rose to 69% from 68.6%.

Still, they were more willing to hire in the short term, with the employment outlook index for the next three months up to 13.4% from 11%, and surging to 30.7% from 9% for next year.

“This was driven by expectations of stronger consumer spending, easing inflation, a possible resolution of the Middle East conflict, improved business operations, and stronger investor confidence,” the BSP said.

However, businesses remained conservative about expanding, with only 12.4% of industry firms open to expanding in November (from 13.6% previously), while 17.1% were planning to do so in the coming year (from 20.8% previously).

“Respondents expected stronger economic activity, although inflation was anticipated to remain above the BSP’s 4% tolerance ceiling,” the BSP said.

Philippine firms now see inflation easing to 5.4% in the year ahead.

However, their above-BSP-target estimate was driven by concerns over persistently high oil prices, uncertainty surrounding the Middle East war, the peso’s weaker purchasing power.

For the August BES, the BSP surveyed 501 firms nationwide, with 195 from the National Capital Region (NCR) and 306 in areas outside NCR, from Aug. 5-31.

CONSUMER OUTLOOK
In a separate BSP survey, consumers also held a rosier outlook on the economy in the third quarter as their CI improved.

Results of the third-quarter consumer expectations survey (CES) showed consumers’ current-quarter CI improved to -29.8% from -42% in the second quarter, but worsened from -9.8% a year ago.

“Consumers became less pessimistic in Q3 2026 amid expectations of higher earnings, additional sources of income, and more stable employment,” the BSP said.

Households’ CI for the next quarter also turned less negative at -0.8% from -16.3%. However, this was a reversal of the 6.9% CI recorded a year earlier.

This came as consumers expect higher earnings, new income sources, and more job opportunities over the next three months.

For the coming year, consumers were more optimistic with their CI jumping to 9.1% from 0.2% in the second quarter, but down from 14.1% in the third quarter of 2025.

“The more upbeat consumer outlook for the year ahead reflected optimism about higher earnings, new income sources, (and) perceived improvements in governance, accountability, and leadership,” the BSP noted.

The CES also showed that consumers were more inclined to buy big-ticket items, such as real estate and motor vehicles, over the next 12 months, but remained cautious about their daily spending in the coming quarter.

“Meanwhile, stronger saving prospects, coupled with weaker spending plans for day-to-day household expenses and lower borrowing intentions, suggest that households remain prudent in managing their finances,” the BSP added.

On the other hand, households expect prices to rise in the year ahead, with inflation seen hitting the BSP’s 4% tolerance ceiling. This was faster than their 3.3% estimate in the second quarter.

According to the BSP, consumers raised concerns about the perceived lack of measures to ease price pressures, rising food and utility costs, and tighter supply conditions.

The central bank expects inflation to average 6.1% this year, before easing to 5.4% in 2027 and 3.3% in 2028.

The latest CES survey was conducted from July 1 to 13, covering 5,476 households, with 2,457 from the NCR and 3,019 from areas outside NCR.